One area where school budgets have felt growing pressure over the last decade, during years of constrained revenue growth, is spending on special education.  CRC recently examined special education finances to provide policymakers with a comprehensive review of the issues surrounding this very important topic.
For a ten-year period ending in Fiscal Year 2010 (FY2010), Michigan total special education spending increased at an average annual rate of 4.8 percent per year, double the average annual increase in inflation over the period.  In FY2010 (most recent data), school districts reported $3.4 billion in combined special education expenditures, up 60 percent from the amount in FY2000.  Significant annual spending increases from 2000 to 2006 (between 6 and 8 percent annually) accompanied the growing special education population. As special education annual enrollment growth tapered off and began to decline in 2006, spending growth moderated (around 3 percent per year).  Over the last decade, total spending increased at a 4.8 percent annualized rate or twice as fast as the change in inflation (2.4 percent per year).
Adjusted for inflation, per-pupil special education spending increased from $12,327 in FY2000 to $14,397 in FY2010, or 17 percent. In comparison, total K-12 per-pupil spending, adjusted for inflation, increased 1.4 percent over the same period (from $9,503 per pupil in FY2000 to $9,633 per pupil in FY2010).  Over the last ten years, special education spending grew faster than overall K-12 spending, both in the aggregate and on a per-pupil basis.  Further, this spending exceeded changes in inflation.  A key factor in this growth was the steady increase in enrollment.  Another likely factor that contributed to this growth was the higher costs associated with delivering special education services and running related programs.  These costs are driven by smaller class sizes, the need for special education aides in the classroom, the rising number of specialists, and the costs of diagnostic and professional support services (nursing and various therapies).

Annual spending levels and growth rates result from the state and federal mandates that districts must adhere to.  These mandates require specific services, some costly, and leave little wiggle room for districts to control costs.  Also, the state aid system does not provide any incentive to control costs, which contributes to the moderate growth rates.  The state aid system, a result of the 1997 Michigan Supreme Court’s Durant decision, is a fixed percentage reimbursement model.  Districts are guaranteed the same level of reimbursement (roughly 30 percent) for special education services regardless of the cost.