Ed Money Watch

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Examining the Data: How the IDEA Funding Formula Fails to Target Funds to Students with Disabilities

Published:  February 25, 2010

The Federal Education Budget Project (FEBP), Ed Money Watch's parent initiative, provides a wealth of state and school district level data on federal funding, demographics, and achievement through its website www.edbudgetproject.org. These data can tell important stories about how federal education funding interacts with student demographics and achievement. Moreover, the data often reveal rarely discussed idiosyncrasies in federal funding and education. From time to time, Ed Money Watch will take a close look at one aspect of the data available through FEBP to highlight the value of this information.

This week we’re looking at the federal Individuals with Disabilities Education Act (IDEA) funding formula. IDEA is the main federal statute that authorizes federal aid for the education of more than 6 million children with disabilities nationally. In fiscal year 2010, the federal government provided $11.5 billion for grants to states through Part B of the law. IDEA Part B funds are distributed to states through a complex formula where each state is guaranteed base funding equal to what it received in fiscal year 1999. The remainder is distributed to states based on their relative share of children within the age range served by IDEA and their relative share of children in that age range living in poverty. Several other complicating factors also can come into play.[1] (See our background page on the topic here.)

The formula's design results in an important trend that policymakers may not have intended to occur. Over time, the share of the annual appropriation each state receives relates less and less to the actual number of students with disabilities. In fact, analysis preformed by Ed Money Watch shows that state allocations of fiscal year 2008 IDEA funding appear more influenced by the number of students living in poverty than special education enrollment.

The table above shows that Louisiana, Tennessee, and Alabama receive the largest federal IDEA allocation per special education student, but these states rank 33rd, 42nd, and 40th respectively in the proportion of students in the state enrolled in special education. This outcome is due to the growing importance of student poverty in the IDEA formula. These same states have some of the highest proportions of students living in poverty. Louisiana ranks 3rd, Tennessee ranks 12th, and Alabama ranks 9th. In other words, the federal IDEA allocation per special education student is much more closely related to the proportion of students living in poverty than to the proportion of special education students in the state.

Indiana and Utah[2], despite having higher proportions of students enrolled in special education than any of the three states mentioned above, both receive nearly $700 less in IDEA funds per special education pupil. The state poverty rankings show that Indiana and Utah have significantly lower poverty rates than Louisiana, Tennessee and Alabama. Again, the relationship between student poverty rates and IDEA allocations is much stronger than the relationship between special education enrollment and IDEA allocations.

Minimum and maximum grant restrictions also blur the relationship between IDEA allocations and special education enrollment because they allow smaller states to get more IDEA funding per special education student than their larger peers.

Vermont, a small state with a population of 94,038 students, and Arkansas, a medium-sized state with a population of 479,016 students, have similar proportions of students enrolled in special education. Arkansas also ranks high in poverty, so it is expected that the state will receive more funding per pupil than Vermont, which has a low poverty rate. However, guaranteed minimum annual increases for small states mandated in the IDEA formula mean that a relatively wealthy small state, like Vermont, receives over $300 more per pupil for special education than Arkansas, despite the latter state’s high poverty rate.

There are many reasons to address these inequities in the way IDEA funds are distributed. Students living in certain states are put at a disadvantage simply because of quirks in the funding formula that minimize the importance of the number of disabled students living in each state. Wealthy small states like Vermont receive much more federal funding per pupil than states like Indiana, where a much larger proportion of students are enrolled in special education and greater proportions of students live in poverty.

Students served under the Individuals with Disabilities Education Act (IDEA) can have a wide range of disabilities, and it is therefore difficult for the federal government to determine what it costs to educate each of them. The federal government estimates, instead, that it costs twice as much to educate an average student with disabilities as it does to educate a child without a disability. But it is crucial that the dollars the federal government allocates for students with disabilities go where they are needed most – to states with large proportions of students with disabilities, and to those that cannot afford to cover the added cost of educating students with disabilities on their own. Only by reforming the IDEA funding formula can this be accomplished.

Download a full spreadsheet of data for all the states here.

[1] States cannot receive less than: (1) the FY 1999 foundation grant plus 1/3 percent of the increase in funding from FY 1999; (2) an increase in funding less than the overall annual appropriations growth rate, minus 1.5 percentage points; or (3) 90 percent of the overall percentage increase in appropriations over the previous year. States also cannot receive more than: (1) the maximum, fully funded grant (40 percent of APPE, times an adjusted count of children with disabilities in the state); or (2) an increase in funding that is greater than the overall annual appropriations growth rate, plus 1.5 percentage points.

[2] Rankings only go to 48 because three states – New Hampshire, New Jersey, and New York – do not report their special education enrollment.

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