Individuals with Disabilities Education Act (IDEA)

During one of our recent events, Sheldon Garon of Princeton University and Ray Boshara of the Federal Reserve Bank of St. Louis referred to the weak household balance sheet as one of the core economic challenges of our time, suggesting that households must focus on asset-building rather than rely on credit and debt.

The American Recovery and Reinvestment Act (ARRA) of 2009 represented an unprecedented federal investment in education, with nearly $100 billion provided to states and local school districts from 2009 to 2011, mostly through the State Fiscal Stabilization Fund. Given the magnitude of this funding (the regular annual appropriation for the U.S. Department of Education is about $68 billion) Congress and the Obama Administration have subjected states and local school districts to an unusual amount of scrutiny.  A report released by the Government Accountability Office (GAO) this month offers an update on local educational agencies’ (LEAs) uses of funds intended for education in the American Recovery and Reinvestment Act (ARRA). The report examines how states used the funds and the degree to which LEA reporting on those funds was effective.

The GAO focuses on the ARRA’s three biggest sources of education funding: the State Fiscal Stabilization Fund (SFSF), $48.6 billion; Title I, Part A grants to local school districts, $10 billion; and Individuals with Disabilities Education Act (IDEA) Part B grants to school districts, $11.7 billion. Collectively those programs totaled $70.3 billion available in fiscal years 2009, 2010 and 2011.  GAO conducted a survey of LEAs from March through May of 2011 and found that LEAs have obligated nearly all of the ARRA funds available to states.  Only 4 percent remain available for expenditure, and those funds must be obligated by September 30, 2012 (a one-year extension from the original date, announced this month by the Department of Education), to be used.

Of the funds that LEAs have used, most were used to create new jobs and retain existing ones, which was one goal policymakers wrote into the Recovery Act. More than three quarters of LEAs spent over half of their SFSF funds to maintain employee salaries.  LEAs used the remainder for one-time expenses that wouldn’t precipitate a funding cliff and require the state to provide additional annual spending once the money dried up.

Most LEAs said that, thanks to the ARRA funds, they were able to maintain or even increase the level of service provided to students.  But with ARRA money running out at the end of this year, and state and local fiscal situations hardly improved, they say the quality of education will likely decrease.  LEAs with a high-poverty student population were particularly hard hit by the economic downturn, and saw more severe budget cuts in their state and local funding, and will bear the brunt of the ARRA funding cliff come 2012. Other LEAs that responded to the survey said that the Education Jobs Fund, which Congress enacted in 2010 to help states and LEAs avoid teacher layoffs, may be enough to compensate for anticipated budget cuts at the state and local level. About half of survey respondents planned to use the bulk of their Education Jobs funds in the 2012 school year, rather than in 2011.

In some cases, though, state and local budget cuts have already had a severe impact on the quality of education, particularly on special education, despite the availability of ARRA funds.  A nuance in IDEA maintenance of effort requirements allows LEAs to reduce local special education funding if their federal IDEA Part B grant is higher than the previous year. The LEA can reduce its own funding then by 50 percent of the increase in federal funding. 

Historically, annual increases in IDEA funding have been small, meaning the maintenance of effort nuance could only have a small effect on an LEA’s special education budget. Given the large increases in IDEA funding under ARRA, the nuance has become more important. In fact, over 25 percent of LEAs have taken advantage of the option to reduce their special education spending since ARRA funds were made. LEAs that took advantage of that funding rule, however, will experience larger funding cliffs when the ARRA funding runs out in 2011 and 2012. The GAO found that fifteen percent of LEAs in that category, and 10 percent of all LEAs, anticipate struggling to meet the IDEA maintenance of effort standard in the 2011 and 2012 school years.  Seven states applied to the Department of Education for a total of 11 waivers of the requirement in state fiscal years 2010 and 2011 in the name of “declining fiscal resources;” five have been granted, and another five declined, with one still under consideration.

In addition to promising to save and create jobs, in enacting the Recovery Act, Congress and the Obama Administration trumpeted a new era of transparency and accountability in government funding.  The GAO examined this claim, looking at reporting requirements for states and LEAs, as well as the accountability measures put in place by the Department of Education. Those measures include audits, reviews of the fund recipients’ financial management practices, and testing of the data’s integrity.  While the accountability measures are fairly comprehensive, the GAO did find some room for improvement.

The Department of Education promised states that they would provide them with technical assistance on the front end, before the Department issued its reports on the states’ financial practices, so that LEAs could work out any kinks in the data collection and reporting system. But a breakdown in communication from the Department meant that states did not all receive that benefit.  The Department conducted the reviews as planned, but follow-up communication between the states and the Department varied greatly. Whereas some states went back and forth with Department staff as many as 10 times, fine-tuning their records-keeping processes, others received only an initial evaluation from the Department and no follow-up. Additionally, while the Department has completed 48 of the SFSF 2010-2011 reviews, it has made only 3 site visit reports and 12 desk review reports available to the public and to state officials.

States did acknowledge, though, that the Department of Education has made reporting requirements more routine and therefore less burdensome over time.  While the original reporting requirements presented a challenge to the states, they have since grown accustomed to the requirements and have developed systems that leave them saddled with fewer time-consuming data collection responsibilities.

The GAO report shows that, while states would benefit from additional assistance from Department officials in providing data back to the Department, the programs generally provided a stop-gap measure to fill major budget shortfalls. LEAs did use the ARRA funds available to them to save or create jobs, an explicit goal of the program; and those funds maintained a quality of education that would otherwise have been sacrificed as a result of states’ financial straits throughout the recession.  But without the continued availability of federal funds, and with state and local tax revenues still far from pre-recession levels, states are struggling to meet their obligations, let alone to invest in expanded capacity and innovative reforms.

The newspapers are full of stories about school districts in financial straits and state budget cuts coming down hard on education spending. Despite the fiscal stress, policymakers still have a lot of opportunities to make good budgeting decisions according to Stretching the School Dollar, a policy brief released last week by the Fordham Institute.

Authors Michael Petrilli and Marguerite Roza outline the common problems with state education policies that lead to harmful cuts and explain how smart policies can blunt the impact of tight budgets. With several states facing lawsuits regarding funding cuts for K-12 education and at least one considering changing its funding formula as a result, Petrilli and Roza’s four recommendations for revamping state funding formulae are particularly interesting.

The first two recommendations related to funding formulae seek to ensure that funds are efficiently distributed to the students that need them. First, the authors encourage states to move toward weighted student funding formulae. Current state education funding formulae are typically more complicated and rely on a staff-based budgeting system where districts receive funds to pay for teachers and other resources based on the number of students enrolled. For example, a district could receive funds for one teacher salary for every 25 students enrolled in its schools. A weighted student funding formula would mean that school districts and schools receive per-pupil funding amounts, with greater resources following students with greater needs.

A second way the authors suggest changing state funding systems is to eliminate excess spending on small schools and small districts. They encourage the use of technology and the sharing of resources, including staff, across districts to reduce spending on specialized courses without having to eliminate them. They note that this can easily be accomplished under a weighted student funding formula.

The second two recommendations attempt to encourage districts to eliminate excessive spending and provide services to students more effectively. The authors suggest changing the way extra funding is distributed for students with learning disabilities. Currently school districts receive extra funding for each they student identify as having a learning disability, creating incentives for school districts to over-indentify students with learning disabilities. Petrilli and Roza encourage states to switch to a system where they allocate funds for students with learning disabilities based on a flat percentage rate of the student population, rather than on individual student identification. This encourages schools and districts to engage in more early intervention activities rather than allow struggling students to fall into special education placements.

Finally the authors recommend limiting the length of time students can be identified as English Language Learners (ELL). This would provide a clear incentive for schools to move students toward English proficiency quickly, instead of encouraging them to keep students in ELL programs for the extra funding.

By creating statewide funding systems that ensure that funds follow the students that need them and provide incentives for schools and districts to work more efficiently, states can save money without drastically changing the number or quality of course offerings to students. Other recommendations the authors make, including changing staffing and compensation policies and scrapping outdated reporting and classroom requirements would create additional savings.

As state policymakers continue to struggle with budget shortfalls, especially in the face of expiring federal funds from the American Recovery and Reinvestment Act, they would be wise to examine Petrilli and Roza’s “smart savings” and reform strategies instead of making the all-to-common and politically expedient “harmful cuts” to education spending that are bound to hurt students far more.

Yesterday the Federal Education Budget Project (FEBP), Ed Money Watch’s parent initiative, released updates to its education funding, demographic, and achievement database (http://www.edmoneywatch.org). These new data include:

• District-level funding for the Individuals with Disabilities Education Act Part B, Title I Part A, and Impact Aid basic support payments, through 2009 with estimates for 2010;
• State-level funding for the Individuals with Disabilities Education Act Part B, Title I Part A, Impact Aid basic support payments, and federal school nutrition programs, through 2009 with estimates for 2010 and levels based on the President’s budget request for 2011.

FEBP is currently the only public source that provides these data all in one place and allows them to be analyzed along side student demographic and achievement data. In fact, the district level Individuals with Disabilities Education Act (IDEA) data were collected directly from state departments of education because the federal government does not make data on district level IDEA allocations publicly available. The Impact Aid data were collected from the National Association of Federally Impacted Schools (NAFIS), and the Title I data were collected from Thompson Publishing.

These data provide an interesting window into the existing federal mechanisms for supporting public education, including services for low income students, special education students, and students that participate in school nutrition programs. FEBP’s comparison functions allow users to conduct comparisons of various indicators including funding across similar states and school districts.

Previous Ed Money Watch posts, under the “Examining the Data” series, use the FEBP comparison tool to explain idiosyncrasies in the existing funding formulas for each of these programs and provide context for the funds with student demographic. These same analyses can be recreated using data for other states and school districts. See the list below:

• Examining the Data: How the IDEA Funding Formula Fails to Target Funds to Students with Disabilities
• Examining the Data: Understanding Title I Funding Distributions
• Examining the Data: Assessing Poverty Through School Nutrition Funding and Participation

The Federal Education Budget Project aims to improve the quality of the education debate by making information on federal funding for education more accessible and transparent for the public, the media, and policymakers. We hope this new wave of data further illuminates the complex nature of the federal role in education funding and spurs conversations about improving federal funding formulas to better serve students and schools.

It’s been a while since we last looked at the status of the education funds allocated through the American Recovery and Reinvestment Act (ARRA). As we have discussed before, the ARRA allocated nearly $100 billion for education programs such as Title I, Individuals with Disabilities Education Act (IDEA) State Grants, and a new program called the State Fiscal Stabilization Fund. Last we looked at U.S. Department of Education data on the obligation and disbursement of these funds in September, things were moving a bit slow. Six months later, it appears that while some funds have gone out quickly, others continue to lag.

As of March 5, 2010, the Department of Education had made nearly 73 percent of the $98.2 billion in ARRA education funds available for states to spend (aka obligated). Of that obligated money, the Department had disbursed 50.8 percent, or $36.3 billion, to states. This means that less than 40 percent of total allocated education ARRA funds have actually left federal coffers for expenditure.

Almost all of the currently available Pell Grant funds (about half of the total obligation) have been disbursed to the states for use. This is not surprising because Pell Grants are automatically distributed via a formula to students that qualify for the grants. States do not need to apply for the funds and the disbursement process is relatively streamlined and familiar. Pell Grants are also disbursed at the beginning of each semester, meaning that all grants for the current school year should have been made by early 2010. The remaining half of the allocated funds is likely to go out to states just as smoothly as soon as the 2010-2011 school year begins.

In contrast, the Department of Education has been disbursing both Title I and IDEA funds relatively slowly. Back in September, only 12.2 percent of Title I and 9.4 percent of IDEA funds had been disbursed. Six months later, those disbursement rates have increased to 22.8 percent and 24.0 percent, respectively (while the amount of obligated funds has doubled). As we’ve mentioned before, this slow rate of disbursement could be attributed to onerous application processes at the state and local level for funds and the monthly process by which schools and school districts pay for employees and other services. This is troubling because summer break is fast approaching, meaning that stimulus spending for the 2009-2010 school year will soon begin to wind down. Similarly, the ARRA funds are set to expire on September 30^th, 2011, giving schools and school districts a year and a half to spend more than three-quarters of the total Title I or IDEA ARRA funds.

State Fiscal Stabilization Funds (SFSF), on the other hand, appear to have been disbursed at a sensible speed. As of March 5^th, 59.9 percent of Education Stabilization Funds and 47.5 percent of Government Services funds had been disbursed to states. The relatively high rate of disbursement can primarily be attributed to the high need for these additional funds at the state and local level to fill budget gaps and the fact that the funds were disbursed through existing state funding formulas. Is it expected that states will spend the vast majority of their SFSF monies by the end of fiscal year 2010 with only a few states allocating remaining funds directly to school districts through Title I formulas in fiscal year 2011.

Of course, the Department of Education has yet to disburse any ARRA funds for some programs. These include Teacher Quality Enhancement grants, State Longitudinal Data Systems grants, and Investing In Innovation grants. Additionally, the only funds that have been disbursed for Race to the Top grants are likely for honoraria for reviewers and other administrative costs. These programs are all competitively awarded based on state and local grant proposals. However, they make up a relatively small portion of the total ARRA education funds.

Clearly, the life-span of the ARRA is far from over. More than half of the total funds allocated for education programs still need to be disbursed to states and spent at the local level. At the same time, school systems around the country appear to be in desperate fiscal straits as state education budgets continue to take drastic hits. Will the current ARRA funds be enough to fill these gaps? Or will the Congress need to pass another stimulus bill to keep schools afloat? Ed Money Watch will be following this process every step of the way.

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 33^rd, 42^nd, and 40^th 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 3^rd, Tennessee ranks 12^th, and Alabama ranks 9^th. 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.

One year ago today, President Obama signed the American Recovery and Reinvestment Act (ARRA) into law. This economic stimulus bill included nearly $100 billion for education programs including Title I grants to local education agencies, Pell Grants, the Individuals with Disabilities Education Act, and a new program called the State Fiscal Stabilization Fund.

Since then, $69.7 billion has been obligated to states and school districts and $33.2 billion of those funds have been disbursed for expenditure (47.6 percent).

Additionally, according to data reported by recipients of ARRA funds, education funds have saved or created nearly 410,000 jobs including nearly 240,000 from State Fiscal Stabilization Funds alone. Based on these numbers, education funds have saved or created more jobs than any of the other non-education programs funded by the ARRA.

However, the ARRA has dealt a mixed hand to some states and school districts according to recent reports. Dramatic one-time increases in funds that will disappear at the end of fiscal year 2010 or 2011 are likely to create significant funding-cliffs for many schools. This means that teachers and other school staff whose salaries have been primarily supported by ARRA funds could be out of their jobs in a year or two. This will also likely be the case for public institutions of higher education that have come to depend on ARRA funds to provide basic services.

Additionally, provisions in the programs funded by the ARRA have allowed for some unintended consequences. For example, a provision in the Individuals with Disabilities Education Act (IDEA), which received $11.7 billion in ARRA funds, allows school districts that receive dramatic increases in funds to redirect state and local funds of up to half the size of those increases to general education purposes if they qualify under state guidelines. As a result, school districts around the country have lowered state and local expenditures on special education, a trend that will likely weaken special education spending in the future.

Beyond these formula-based programs, the ARRA also created two competitive grant programs intended to increase and encourage innovation at the state and local level: $4.35 billion for Race to the Top and $650 million for Investing in Innovation. While funds for both of these programs have yet to be distributed, they have both made significant ripples in the existing education landscape.

At this point, it’s still too early to tell whether the ARRA has positively affected education in the United States. But it is unlikely that American public schools and institutions of higher education will see another investment of federal dollars of the same size and magnitude. Let’s hope it will result in more progress than waste.

Last week, the Wall Street Journal published an article highlighting the large number of school districts that will opt to take advantage of an Individuals with Disabilities Education Act (IDEA) provision that allows them to reduce state and local special education spending when their federal funding under the law has increased from the year before. This provision is particularly relevant in 2010 because supplemental IDEA funding through the American Recovery and Reinvestment Act has dramatically increased the funding each district will receive. The article, unfortunately, does not fully discuss why so many districts are suddenly able to utilize this provision. It turns out that many states, in an attempt to make more districts eligible for the funding reduction provision, loosened the requirements districts must meet to qualify.

Essentially, the provision allows school districts that meet certain requirements – like those outlined in state academic performance plans - to reduce state and local spending on special education services by half of the district’s increase in federal IDEA funds. For example, if a district received $500,000 in federal funds under IDEA in 2009 and $700,000 in 2010, it could lower its state and local spending on special education by $100,000 (half of the difference between the 2010 and 2009 IDEA allocation) and use that money on general education purposes (i.e. non-special education purposes). For districts in great fiscal hardship, this provision could mean keeping a much needed math teacher or maintaining five day bus services.

In typical years, few school districts opt to take advantage of this IDEA provision for a couple of reasons. Primarily, only a small number of districts are eligible for the provision because few are able to meet the state-defined student achievement requirements. Even for districts that do qualify, the increase they receive in IDEA funds from year to year is rarely large enough to justify opting into the funding reduction provision. A doubling of IDEA funding under the American Recovery and Reinvestment Act in 2009, however, changes that calculation.

This year a significant number of districts reported their intent to use this IDEA provision – 44 percent of districts according to a report by the Government Accountability Office (GAO). The report finds that several states, including Arizona, Michigan, and Ohio lowered their eligibility requirements to allow more districts to take advantage of the IDEA provision. These states all saw dramatic increases in the percent of districts eligible for the provision. In fact, under the new criteria, 99 percent of Ohio districts are considered eligible for the provision in 2010, compared to only 8 percent in 2009.

Other states, including California and Illinois, increased the minimum number of special education students a district must have before it is required to report student achievement for that sub-group. As a result, districts with few special education students do not have to include them in accountability efforts at all, making it easier to qualify for the IDEA funding reduction provision. The number of districts eligible for the provision in both of these states increased by 38 percent or more from 2009 to 2010.

While IDEA funding provision may be a lifeline for school districts today, it could hurt the quality of special education services provided in these districts in the future. A separate IDEA rule called maintenance of effort requires districts to maintain the previous year’s level of local spending on special education to receive federal IDEA funds. Districts can legally skirt this rule when they opt into the IDEA provision and lower state and local spending by 50 percent of the increase in IDEA funding in 2010. These states will only be required to maintain the lowered level of local spending to receive their 2011 IDEA allocation.

In some districts, this means a difference of millions of dollars for special education services going forward, an issue many stakeholders are bemoaning. But these stakeholders should recognize that the districts are not the only ones to be held accountable for this potential permanent drop in state and local special education spending. The states, which have consciously lowered criteria for the provision or changed other requirements, are just as responsible.

In early September the Department of Education (ED) released additional guidance that provides details on how states and school districts can use Individuals with Disabilities Education Act (IDEA) stimulus funds for reform activities. This guidance seeks to ease some of the inherent tension in the American Recovery and Reinvestment Act (ARRA) goals of saving jobs and promoting education reform - a tension that likely has slowed the speed with which states and districts have been able to spend funds. However, one piece of the outlined reform efforts can bridge the gap between these two seemingly opposite goals. Specifically, the guidance provides methods for using ARRA IDEA funds to improve teacher effectiveness and distribution that also have important implications for the teacher workforce.

The Department of Education (ED) released long awaited guidance documents for the major programs funded in the American Recovery and Reinvestment Act on April 1st. Each document specifies how funds for each program will be distributed, how each governor must disperse the funds, and how states and local education agencies (LEAs) will be able to use them.