Proposed bill could structurally change special education funding

As the state continues to grapple with financial turmoil, some are offering solutions to issues that seek to redefine the way the state has worked for years. Conversations have arisen about implementing tolls or legalizing marijuana, all to generate revenue and attempt to close the state’s massive, and ballooning, deficit. While some of these issues are revenue-based, some are looking at the other side of the balance sheet and seeking to change the way the state funds certain areas. In the case of one new bill, the goal is to change the way the state funds special education.
Senate Bill 542, sponsored by Sen. Carlo Leone, who represents Stamford and part of Darien, and Sen. Timothy Larson, who represents East Hartford, East Windsor, South Windsor, and part of Ellington, seeks to establish what is being called a “a special education predictable cost cooperative,” or simply the co-op, to fund special education services and programs statewide. The bill was first referred to committee in late January, with public testimony coming roughly a month later.
The co-op would be funded by contributions from both municipalities and the state. Money from the special education portion of the Education Cost Sharing grant along with the Excess Cost Reimbursement pool would constitute most of the state-side funding for the co-op. A policy brief from March 2017 lays out five actuarial principles to make the co-op fiscally viable. This brief is still considered a working draft, and future changes can be expected.
The brief was written by Katie Roy, the director and founder of the Connecticut School Finance Project, along with fellow members of CSFP, members of the UConn Goldenson Center for Actuarial Research as well as the Neag School of Education, and Zahava Stadler of EdBuild, a group focused on looking at the way education is funded and designed. The co-op would aim to reimburse districts across the state for 100% of their special education expenditures. Stadler was involved with a report in March 2016 titled, “Improving How Connecticut Funds Special Education,” specifically in working on identifying the best practices for special education funding systems. However, Stadler was not involved in the development of the co-op.
The brief lays out six steps to explain how the proposed co-op would work.
First, there would be an initial base community contribution. This is “the average basic expenditure per special education student in Connecticut based on the prior year’s expenditures.” Since it would be based on a state average, it would be the same amount for every district. Then, the margin adjusted community contribution (MACC) would be calculated. This would be to account for “volatility associated with the actual basic per pupil special education expenditures each district incurs.”
The contribution margin would be set at a constant $2,000, so the MACC would be the same for every district at its initial contribution plus $2,000.
Then there would be an experience adjustment. This, according to the brief, “is where differences will start to occur in the community contribution for each district.”
This step exists to protect a given district from being penalized for having a small number of students that are extremely high-cost. The adjustment would change the district’s MACC based on the district’s actual spending in the previous year compared to the state average.
If a district had spending higher than the state average in a given year, the MACC would be increased. A district with less spending than average would have the MACC decreased. The goal of this step is to build in predictability in spending for districts, but some have argued that this way of adjusting the MACC would incentivize districts to spend as little as possible in an effort to be below the state average. Diane Willcutts, a special education advocate, testified that “the co-operative provides districts with strong incentives to keep costs below the state average without a mechanism for ensuring that students with disabilities are appropriately provided services to meet their educational needs.”
Following the experience adjustment, the policy brief explains the reserve fund, or stop-loss policy. Approximately $50 million would be set aside in a reserve fund so that in “years where special education expenditures exceed the total amount of state and community contributions, each district can still be reimbursed for 100% of its special education expenses.” This would initially be established out of current special education funding money, and would be 2.5% of the total special education expenditures in the state from the prior year.
The contribution refund follows. After all districts were reimbursed for their special education expenditures and the reserve fund was replenished, leftover money would go to districts that spent below the state average. This, like the experience adjustment, has been pointed to as an incentive for districts to actively try to spend less than the state per-pupil average on special education.
Finally, there is the equity adjustment. Districts would be given a Public Investment Communities index score, which measures wealth of communities. The score ranges from 0 to 500, with 500 being a poor community. The higher a district score, the higher the discount that community would receive on its community contribution.
A board of directors would be formed to oversee the co-op. This board would have a measure of power, however, that was not initially outlined in the policy brief.
Rep. Gail Lavielle asked in testimony if districts would be obligated to prove to the co-op that certain special education services are justified. The response from CSFP included that “ultimately, the co-op’s board (comprised of co-op members and state officials) will have the authority to determine which types of expenses are special education expenses.” The brief ends with estimated funding models for districts in the state.
The numbers provided as examples in the policy brief initially appear sound. Data used was from the 2014-15 school year, and the city of Bridgeport district is used as one example to show how contributions and funding would be laid out. In the proposed co-op, Bridgeport’s district would contribute about $32.5 million, the state would contribute $38.88 million, and federal funding would account for $4.61 million, for a total of $75.95 million in special education spending to be reimbursed. However, a look at the actual spending data in Bridgeport, according to the State Department of Education, that year raises some questions. Bridgeport’s actual spending on special education was $18.97 million, the state’s actual funding for Bridgeport was $49.32 million, and federal money was $6.51 million, for an actual spending total of $74.8 million in 2014-15. The difference between the proposed co-op spending of $75.95 million and actual spending $74.8 million is small, but the breakdown is noteworthy. The proposed co-op shows Bridgeport contributing just over $13 million more than what it actually spent in 2014-15, with the state contributing about $11 million less to special education spending. Ultimately, CSFP insists that the co-op would comply with state and federal laws regarding special education. The IDEA requires states spend as much on special education in each year as they had in the year before,. 
The Connecticut School Finance Project uses individual district end of year reports to draw data, however, and not the SDE data. The reason for this is that the the state data looks at the education funding in it’s entirety, which is to say general education as a whole, and then pulls a percentage of that data to come up with the amount spent on special education. By looking at district year end reports, CSFP hopes to be able to look at special education spending on its own, independent of general education spending.
In Greenwich, total special education spending for 2014-15 was $41,220,981. The state portion was $1,857,654, the town portion was $37,427,093, and federal money totaled $1,936,254. The co-op model estimates Greenwich would contribute $38,122,201, about $700,000 more than it spent the year before. The state would contribute $1,493,500 to Greenwich, about $360,000 less than actually spent. Total special education spending in the model estimate is $41,674,201, which is a difference of only about $450,000 in total; however, it is in the form of a spending increase. Still, it appears, although this is just an estimate, that many towns would be asked to contribute more to their special education spending.
Darien’s actual total special education spending in 2014-15 was $28,576,750. The state portion was $3,327,607 and the town portion was $24,431,350, with federal money adding up to $817,793. Not all necessary data relevant to Darien was available at press time to break down exactly what the model estimates would come up with locally, but it seems that in the state’s wealthiest towns and the state’s poorest towns alike, town spending on special education funding would go up and the state contribution would go down.
Entrance into the co-op is, in theory, optional. A town could decide not to participate, but doing so would mean forgoing all funding for special education from the state. Some towns, in the latest budget proposal from Gov. Dan Malloy, are slated to receive almost no money for education at all, and could consider not entering the co-op should the legislation pass, depending on what level of funding in the budget is restored by the legislature. Members of CSFP have strongly criticized the budget  proposed by the governor, as have many members of the legislature on both sides of the aisle. 
While the proposal is still relatively young, and it is difficult to put together estimates in towns across the state, if this is the case in Bridgeport and Greenwich, what can be expected for the rest of the state? 
Some giving testimony spoke strongly against the proposed co-op. Andrew Feinstein, an attorney who specializes in representing families with children with disabilities, urged the Committee on Insurance and Real Estate to “approach SB 542 with extreme caution.”
“As a preliminary matter, let’s understand that this bill does nothing to help children with disabilities,” Feinstein said. Feinstein explained that the Individuals with Disabilities Education Act required districts to provide students with disabilities a free and appropriate education.
“School districts are not allowed to provide inadequate education because an appropriate education would cost too much,” Feinstein said, adding that “the unpredictability of funding or the tightness of town budgets cannot serve to deprive a child of education guaranteed by law.”
Feinstein also said that the proposed co-op appears to simply offer the bare minimum in education as offered by law, and does not address what would happen to a district that sought to offer a first-rate special education program.
“What about the school that was to offer a first-rate literacy program, or a center for applied behavior analysis, or an alternative school for students with emotional disturbances?” Feinstein asked. “Will an insurance scheme reimburse a conscientious district that wants to offer special education services with funds collected from other school districts that are barely able to provide the minimum required by law?”
As already pointed out by CSFP, the co-op board would have the authority to decide what expenditures count as special education expenditures. Something like professional development for a general education teacher in a special education instructional method could potentially not be covered by the co-op.
Feinstein closed by referencing the recent CCJEF ruling, saying it “labeled Connecticut’s funding of special education irrational,” before adding, “I see nothing in SB 542 that makes it more rational.”
Lavielle, ranking member of the Education Committee, also had reservations about the proposal. “I appreciate the efforts of the Connecticut School Finance Project to develop this proposal and discuss it with legislators,” Lavielle said, “[but] at this time, I still feel it raises too many questions.”
John Bestor, a former school psychologist, wrote that the proposed co-op “represents a serious threat to over 40 years of special education programming decisions which are — by law — supposed to be determined through a planning and placement team meeting process that includes both teachers and parents who know the student’s educational needs best.” It should be noted that throughout the policy brief, and in other reports, CSFP insists that the decisions related to identification of students and delivery of services would continue to be made at the local level. 
State Rep. Terrie Wood met with Roy about three weeks ago.
“I was impressed with all the research her group had done. However, the end result from a very quick look, is off. It is not equal funding per student at all and many of us believe this is illegal,” Wood said, adding, “Each student in a special education program needs to be treated equally. Equal funding for each student regardless of income.”
Wood also said that currently, “My days have been packed with getting bills out of committee and getting co-sponsors for my key bills,” so she has not had a chance to completely read the CSFP report.
There was also support heard for SB 542. Kevin Lembo, the state comptroller, spoke in support of the co-op. “I am heartened by the innovative methods used within the cost cooperative proposal,” Lembo said. Lembo also pointed out that, “Connecticut relies more on heavily on local property taxes for education than any other state in the nation.” The co-op would be an “innovative special education funding policy that provides consistency and predictability to our local school district budgets,” according to Lembo. The reliance on property tax for education funding is a “grave weakness,” according to Lembo, who also applauded the co-op idea for bringing predictability and stability to district budgets each year.
House Bill 7255 looks to further advance the discussion and debate, as it establishes a special task force to conduct a feasibility study on the co-op. This bill also heard testimony, including from Kevin Smith, the Superintendent of Schools in Wilton. The co-op, “has the potential of creating predictability in annual special education expenditures for local districts,” said Smith, after saying that special education costs are, “some of the most volatile,” in the Wilton budget. Smith closed by saying, “it is worthwhile to conduct a feasibility study.” Nathan Quesnel, the superintendent in East Hartford, and agreed with his Wilton counterpart. “HB 7255 allows for the study of an interesting concept that I believe should be fully reviewed and considered,” said Quesnal. Quesnal urged that many still have questions about the proposal, but that HB 7255 would help to answer concerns of districts who have not been as supportive. ” The superintendent of Madison Schools, Thomas Scarice, and Director of Special Education, Dr. Elizabeth Battaglia, were not supportive, as they pointed to the co-ops inability to address the constantly rising special education costs and lack of a cost control mechanism as a reason to avoid the idea.
Feinstein also testified regarding HB 7255. Noting that the bill creates a task force, Feinstein said, “The task force is made up primarily of school district officials. Students with disabilities, their parents, and their advocates have no place on the task force.” Willcutts also testified on this bill with a similar tone to Feinstein, saying, “if there is a task force, there should be an equal number of members representing the interests of children with disabilities as there are those representing school districts.”
 
UPDATE:  An earlier version of this story referenced a post by Jonathan Pelto. Pelto alleges that members of the CSFP had illegal contact with state officials in the process of designing and proposing the co-op. This has been removed as Pelto’s allegations are unsubstantiated and unverified, and should not have been included. Dan Arestia regrets this mistake.
 
[email protected]