Funding Special Education in the United States

The landscape of special education funding in the United States is complex and constantly shifting. It's shaped by decades of legislation, advocacy, and changing priorities. A key driving force is the understanding that strategic investment in education, when allocated effectively, leads to improved student outcomes and a reduction in achievement gaps.

The Foundation: Federal Legislation

The journey toward equitable funding for special education began with the Rehabilitation Act of 1973, which prohibited discrimination based on disability. This act laid the critical groundwork for future legislation. Building upon this foundation, the Education for All Handicapped Children Act of 1975, later renamed the Individuals with Disabilities Education Act (IDEA) in 1990, solidified the right of students with disabilities to a Free Appropriate Public Education (FAPE). The IDEA also introduced the concept of Individualized Education Programs (IEPs), tailored to meet each student's unique needs.

IDEA governs how states and public agencies provide early intervention, special education, and related services to more than 8 million (as of school year 2022-23) eligible infants, toddlers, children, and youth with disabilities.

The IDEA: Formula and Discretionary Grants

IDEA operates through two primary funding mechanisms: Formula Grants and Discretionary Grants.

Formula Grants: These grants are allocated to states based on the amount of IDEA funding they received in Fiscal Year 1999. If there is more money available for a given year compared to the previous year, additional funding is calculated based on the state's total number of children (ages 3-21) with disabilities and the total number of children living in poverty. This formula ensures that states with higher populations of students with disabilities and greater economic need receive more support.

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Formula funding to states must be passed down to Local Education Agencies (LEAs) to help cover the cost of special education and related services, ensuring that schools can implement the requirements set out in IEPs. A portion of these grants also support early intervention services for children under the age of three who may be at risk of developmental delays.
Discretionary Grants: These grants are awarded through a competitive process to state educational agencies, institutions of higher education, and other nonprofit organizations. The purpose of these grants is to support research, technology and media services, state personnel development, parent training, and information centers. Typically, funding for these programs becomes available in the Spring with a deadline in the Summer.

The Funding Gap: Federal vs. State Contributions

While federal funding is vital, it only covers a fraction of the total expenses associated with special education. The federal government initially pledged to cover 40% of the average per-pupil spending related to special education services. However, the current reality is that the federal share hovers around 11%. This discrepancy places a significant financial burden on states and local districts.

State-Level Funding Models

State funding for special education varies dramatically, reflecting different legislative priorities, population needs, and approaches to funding allocations. Some common models include:

Multiple Student or Single Student Weights Funding: Most states use multiple student weight as their funding mechanism to account for students who might cost more to educate based on factors like severity of disability or resources needed. This ultimately leads to allocating more funds for students with greater needs. Other states use Single student Weight systems which provide funding for each student with a disability.
Census-Based Funding: In some states, it is assumed that each district has the same percentage of students with disabilities, rather than the actual number of students receiving services.
Resource-Allocation Funding: Under this model, the state distributes resources instead of dollars based on the number of students requiring special education services. For example, a state may provide one teacher and one aid for every student who may need individualized support.

In addition to these formula-based approaches, states can also offer competitive funding opportunities to support specific project-based programming designed to address unique local needs.

The Role of Private Foundations

Beyond public funding, private foundations are increasingly important sources of grant funding for special education initiatives. Organizations like the Learning Disabilities Foundation of America, Dorothea Haus Ross Foundation, and the Charles Lafitte Foundation dedicate resources to serving students with disabilities and promoting educational equity. These private funds are either distributed through a closed application process or through open competitions, and are used to support research and innovation in special education practices, teacher training, technology development, and inclusive classroom environments.

Challenges and Disparities in Public Education Funding

The funding of special education is further complicated by broader issues within the public education system. These include deeply inequitable school funding, rising costs of healthcare and pensions, and a growing number of students with complex needs.

Deeply Inequitable School Funding: Public schools in the United States are among the most inequitably funded of any industrialized nation, with schools and districts experiencing significant funding disparities due in large part to reliance on local property taxes. State funding rarely equalizes disparities. In fact, only 18 states provide at least 10% more funding to high-poverty districts than low-poverty districts, and nearly one third provide less funding to high-poverty school districts than low-poverty districts. On average, school districts serving the highest proportions of students of color receive $2,700 less per student in state and local funding compared to those with the fewest students of color. The federal government provides some support through Title I and other programs to help address these disparities.
Rising costs of health care and pensions: public schools are responsible for funding employee health care and retirement benefits. Personnel costs comprise 77% of public school expenditures, with 51% allocated to teacher salaries and benefits.
A student population with growing needs: Over the past decade, the share of low-income, special education, homeless, and English learner students has grown. Research shows that student outcomes are adversely impacted when education funding is cut. A key factor behind these negative effects was the loss of teachers-the most influential in-school factor affecting student learning.

The Impact of Inadequate Funding

When special education programs are underfunded, the consequences can be far-reaching:

Denial of Eligibility: Schools may attempt to reduce costs by denying students eligibility for special education services in the first place.
Understaffing: Even when students are deemed eligible, schools may lack the staff necessary to meet their needs adequately. This can lead to overburdened teachers and therapists, and a failure to implement IEPs properly.
Restricted Placement Options: The IDEA requires that students be placed in the Least Restrictive Environment (LRE), meaning they should be educated with typical peers to the greatest extent possible. However, underfunded schools may restrict placement options to more cost-effective, but potentially less appropriate, settings.

It’s critical that we get increased funding for special education services in order to meet the needs of students with disabilities and achieve compliance with the Individuals with Disabilities Education Act (IDEA). Attempts have been made to make legislative changes for years, but it hasn’t happened. When it was enacted in 1975, the IDEA proposed that federal funding would cover up to 40 percent of the cost of programming for students with Individualized Education Programs (IEPs). The current reality is that federal funding covers approximately 14.7 percent of the costs, creating a shortage in the billions. In response, the IDEA Full Funding Act was introduced to Congress on March 26th by Senators Chris Van Hollen (D-MD) and Pat Roberts (R-KS). This isn’t the first go-around at increasing funding: Congress has unsuccessfully proposed legislation since 1999. Under the IDEA, students with disabilities who require specialized instruction must receive the services they need without regard to cost. In theory, it sounds fantastic. But when the money isn’t there to pay for those services, the school districts are in a bind and end up providing less than the law requires. It’s like telling a mother of eight that she has $100 to feed her children for the month: she knows what they need, and she wants to give it to them, but she certainly can’t do it appropriately on that budget. Cuts would have to be made, either sacrificing the quantity or quality of the food. The lack of special education funding hurts students who don’t receive the services they need, it hurts teachers and itinerant service providers who are overworked or lacking the tools necessary to help their students, and it hurts administrators who are pressured to make up for this lack of funding through local levies and budget cuts. When school districts can’t secure funding to fill the gap, cuts have to be made. Sometimes cuts come in the form of denying a student eligibility under the IDEA from the start. If the school has fewer students to serve, the cost should, in turn, be lower. Budget cuts can also come in the form of understaffing. Where students are deemed eligible for services, the school may be understaffed to meet the needs of all of those students. For example, a building may need two speech language therapists to be able to fulfill the needs of its special ed students. Since the school district doesn’t have the funds to hire a second therapist, they may end up either failing to implement a properly written IEP (not providing the stated minutes of service), or they may just write in a time allocation that is much less than the child needs, to ensure compliance. Either way, students are underserved. Another way districts may deal with the lack of funding is by restricting placement options. The IDEA requires that students are placed in an educational setting that is their least restrictive environment, meaning that they should be with typical peers as much as possible, given their needs and circumstances. If, for example, a student with autism can function appropriately in a general education classroom along with the assistance of a one-to-one aide, the school is required to place him there instead of a more restrictive environment. Yet a more restrictive, one-size-fits-all classroom environment might be more cost-effective for the school if they keep all students with a particular category of eligibility (such as autism or emotional disturbance) in one room and share resources. Where a student’s least restrictive environment (LRE) is outside of the district, schools watching their dollars may refuse, insisting that they can educate the student in-house. The students with disabilities are the ones who are most obviously hurt by underfunding of the IDEA. And a school’s inability to secure funding is not a valid defense to a Due Process Complaint for failure to provide a free and appropriate public education (FAPE) in a student’s LRE, as required by the IDEA. Still, we must acknowledge that underfunding does stunt the abilities of well-meaning teachers and administrators, who only have so much time and/or money to go around, and are forced to make budget cuts or do work that they’re not proud of. Something needs to be done to end this cycle of underfunding so that schools can do their job to provide these students with a FAPE in their LRE. Congress has been trying to correct the funding deficit for years and has met with nothing but failure, but we can’t give up on something this important. In the words of author Gena Showalter, “Giving up is the only sure way to fail.” Maybe this go-around will be the one that makes a difference in the lives of our children.

Project 2025: A Potential Shift in Federal Funding

Project 2025 proposes providing federal special education funding with “no strings attached,” which would give states and districts broad flexibility to redesign how special education services are provided. Project 2025 proposes a major shift toward a market-driven, parent-directed model by making each child’s share of federal special education funding available directly to families. Instead of districts determining how funds are used through the IEP process, parents would have broad discretion to decide how to spend federal dollars-including on private schools, therapies, or other educational services-even if those services are not approved by a school district or included in an IEP.

It also is the case that, on average, the amount of IDEA funding available per student is small-approximately $2,500 per student receiving special education, which is far less than the average additional cost of providing special education services, especially for students with significant needs. For instance, based on a recent cost study from Ohio, special education costs an additional $9,000 per student with a Specific Learning Disability, on average, and $37,000 for a student with an Autism Spectrum Disorder.

Implementing Project 2025’s proposals would require significant changes to IDEA’s funding formula, legal requirements, and regulations. However, such changes can only occur if Congress amends the law; the secretary of education does not have the authority to waive IDEA’s requirements. Although details remain unclear, consolidating federal special education funding into a single block grant that operates outside IDEA would allow Congress to set new rules for how states and districts access and use federal funds, without the constraints imposed by IDEA.

In addition to nullifying IDEA’s existing requirements and safeguards for students with disabilities, shifting all or most IDEA funding into a separate block grant program could also set into motion other changes that reshape special education policy at the state and local levels. States might opt out of IDEA entirely. With less federal funding tied to IDEA’s requirements, some states and districts may decide that following the law is no longer worth the cost. While no state has ever withdrawn from IDEA, states like Tennessee, Oklahoma, and South Carolina have toyed with the idea in the past. If appropriations for IDEA are significantly reduced and compliance costs remain high, some states could reconsider withdrawing. Currently, IDEA funding offsets an estimated 12% of what states and districts spend on special education. IDEA’s maintenance of effort (MOE) requirements currently tie state and local special education spending to the amount of IDEA funding received. Without MOE requirements, some states and districts may choose to reduce their own funding for special education services, especially if the federal funding drop is significant.

Without IDEA’s federal formula ensuring more equitable distribution of federal funding, a new block grant could create large disparities. If federal funds are no longer a stable source of state funding for students with disabilities, disparities between wealthier and poorer states or districts could grow. As federal policymakers consider major changes to the structure and delivery of special education funding, the stakes for students with disabilities are high.

The Future of Special Education Funding

As we look to the future of funding for special education, several trends are likely to shape this landscape. At the federal level, there are currently ongoing discussions about increasing IDEA funding to align with the original 40% commitment more closely, through legislation like the IDEA Full Funding Act. However, achieving this goal will require significant legislative and budgetary changes to the formula being used to calculate state allocations. State-level funding will continue to vary widely, with some states exploring new models to ensure a more equitable distribution of resources for special education. Private foundation funding will likely continue to support innovation in special education, particularly in areas like technology development and teacher training.

The future of special education will likely depend on how Congress navigates these tradeoffs-balancing a desire for flexibility and innovation with the need to maintain funding stability, ensure equity, and uphold the rights of students with disabilities.

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