Financing Special Education

[Pages:65]Citizens Research Council of Michigan

Financing Special Education:

AAnnaallyysseess aanndd CChhaalllleennggeess

MMaarrch 2012 RReeppoorrtt 337788

CELEBRATING 96 YEARS OF INDEPENDENT, NONPARTISAN PUBLIC POLICY RESEARCH IN MICHIGAN

Board of Directors

Chair Jeffrey D. Bergeron

Jeffrey D. Bergeron Ernst & Young LLP Michael G. Bickers PNC Financial Services Group Beth Chappell Detroit Economic Club Mark A. Davidoff Deloitte LLP Terence M. Donnelly Dickinson Wright PLLC Randall W. Eberts W. E. Upjohn Institute David O. Egner Hudson-Webber Foundation New Economy Initiative Laura Fournier Compuware Eugene A. Gargaro, Jr. Manoogian Foundation

Advisory Director

Vice Chair Terence M. Donnelly

John J. Gasparovic BorgWarner Inc. Ingrid A. Gregg Earhart Foundation

Marybeth S. Howe Wells Fargo Bank Nick A. Khouri DTE Energy Company Daniel T. Lis Kelly Services, Inc.

Sarah L. McClelland JPMorgan Chase & Co. Michael P. McGee Miller, Canfield, Paddock and

Stone PLC Aleksandra A. Miziolek Dykema Gossett PLLC

Jim Murray AT&T Michigan

Treasurer Aleksandra A. Miziolek

Cathy Nash Citizens Bank

Paul R. Obermeyer Comerica Bank

Brian Peters Michigan Health & Hospital Association

Kevin Prokop Rockbridge Growth Equity, LLC

Lynda Rossi Blue Cross Blue Shield of Michigan

Jerry E. Rush Meritor, Inc.

Michael A. Semanco Hennessey Capital LLC

Terence A. Thomas, Sr. Thomas Group Consulting, Inc.

Kent J. Vana Varnum

Theodore J. Vogel CMS Energy Corporation

Board of Trustees

Louis Betanzos

Chair Eugene A. Gargaro, Jr.

Terence E. Adderley Kelly Services, Inc.

Jeffrey D. Bergeron Ernst & Young LLP

Stephanie W. Bergeron Walsh College

David P. Boyle PNC

Beth Chappell Detroit Economic Club

Mary Sue Coleman University of Michigan

Matthew P. Cullen Rock Ventures LLC

Tarik Daoud Long Family Service Center

Stephen R. D'Arcy Detroit Medical Center

John M. Dunn Western Michigan University

David O. Egner Hudson-Webber Foundation

New Economy Initiative

David L. Eisler Ferris State University

David G. Frey Frey Foundation

Mark T. Gaffney

Eugene A. Gargaro, Jr. Manoogian Foundation

Ralph J. Gerson Guardian Industries Corporation

Eric R. Gilbertson Saginaw Valley State University

Allan D. Gilmour Wayne State University

Alfred R. Glancy III Unico Investment Group LLC

Thomas J. Haas Grand Valley State University

James S. Hilboldt The Connable Office, Inc.

Paul C. Hillegonds DTE Energy Company

Daniel J. Kelly Deloitte. Retired

David B. Kennedy Earhart Foundation

Mary Kramer Crain Communications, Inc.

Gordon Krater Plante & Moran PLLC

David Leitch Ford Motor Company

Edward C. Levy, Jr. Edw. C. Levy Co.

Daniel Little University of Michigan-Dearborn

Alphonse S. Lucarelli Ernst & Young LLP, Retired

Sarah L. McClelland

JPMorgan Chase & Co.

Paul W. McCracken University of Michigan, Emeritus

Patrick M. McQueen McQueen Financial Advisors

Robert Milewski Blue Cross Blue Shield

of Michigan

Glenn D. Mroz Michigan Technological University

Mark A. Murray Meijer Inc.

Cathy H. Nash Citizens Bank

James M. Nicholson PVS Chemicals

Donald R. Parfet Apjohn Group LLC

Sandra E. Pierce Charter One

Philip H. Power The Center for Michigan

Keith A. Pretty Northwood University

John Rakolta Jr. Walbridge

Douglas B. Roberts IPPSR- Michigan State University

Milt Rohwer Frey Foundation

Irving Rose

Edward Rose & Sons

George E. Ross Central Michigan University

Gary D. Russi Oakland University

Nancy M. Schlichting Henry Ford Health System

John M. Schreuder First National Bank of Michigan

Lloyd A. Semple University of Detroit Mercy

School of Law Lou Anna K. Simon Michigan State University

S. Martin Taylor Amanda Van Dusen Miller, Canfield, Paddock

and Stone PLC

Kent J. Vana Varnum

Theodore J. Vogel CMS Energy Corporation

Gail L. Warden Henry Ford Health System, Emeritus

Jeffrey K. Willemain Deloitte.

Leslie E. Wong Northern Michigan University

Citizens Research Council of Michigan is a tax deductible 501(c)(3) organization

Citizens Research Council of Michigan

Financing Special Education:

Analyses and Challenges

March 2012 Report 378

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FINANCING SPECIAL EDUCATION: ANALYSES AND CHALLENGES

Contents

Summary ..................................................................................................................... v Introduction ................................................................................................................ 1 Background ................................................................................................................. 2

Provisions in Federal Law .............................................................................................. 2 Michigan Laws, Rules and Regulations ............................................................................ 3 Profile of Michigan's Special Education Population ........................................................... 4

Enrollment by Type of District ................................................................................... 8 Where Do Special Education Students Receive Services? ............................................ 9 Special Education Finances ....................................................................................... 11 A Complex System ...................................................................................................... 11 Special Education Spending: A Statewide Perspective ................................................... 12 Spending Comparisons: Special and General Education ................................................. 14 Per-Pupil Spending Differences across Districts .............................................................. 16 Components of Special Education Spending .................................................................. 18 Spending by Function ............................................................................................ 19 Spending on Personnel .......................................................................................... 20 Spending on Transportation ................................................................................... 21 Where the Money Comes From .................................................................................... 22 The Durant Decision .............................................................................................. 23 State School Aid Act .............................................................................................. 24 ISD Special Education Property Tax ......................................................................... 27 Federal IDEA Funds ............................................................................................... 34 Medicaid Funds ..................................................................................................... 35 The General Fund Subsidy ..................................................................................... 37 Challenges Facing Special Education Finances ......................................................... 42 Federal Policy ............................................................................................................. 42 State Policy ................................................................................................................ 43 Funding Employer-Required Retirement Obligations ....................................................... 44 School Aid Fund and State Aid ..................................................................................... 45 Property Tax Limitations .............................................................................................. 47 General Fund Budget Pressures ................................................................................... 50 Conclusions ............................................................................................................... 52

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FINANCING SPECIAL EDUCATION: ANALYSES AND CHALLENGES

Charts

Chart 1 Students with IEPs by Disability Classification in 2010 ............................................ 6 Chart 2 Change in Mix of Largest Disability Identifications: 2000 to 2010 ........................... 7 Chart 3 Total K-12 and Special Education Per-Pupil Spending ........................................... 14 Chart 4 Per-Pupil Spending by ISD in FY2010.................................................................. 17 Chart 5 Special Education Spending by Function in FY2010 .............................................. 19 Chart 6 Special Education Personnel: 2006 to 2010 ........................................................ 20 Chart 7 Per-Pupil Spending and ISD Property Tax Rates in 2010 ....................................... 31 Chart 8 Per-Pupil Spending and ISD Property Tax Bases in 2010 ....................................... 31 Chart 9 Per-Pupil ISD Property Tax Yield Change: 2007 to 2010 ...................................... 32 Chart 10 FY2010 Special Education Revenue .................................................................... 38 Chart 11 FY2007 Special Education Revenue .................................................................... 38 Chart 12 General Fund Share of Total Special Education Revenue by ISD in FY2007 ............ 40 Chart 13 Per-Pupil General Fund Revenue for Special Education by ISD in FY2007 ............... 41 Chart 14 Effect of MPSERs Retirement Contribution on Basic Grant .................................... 45 Chart 15 Growth of School Aid Fund Revenue: FY1998 to FY2010 ..................................... 46 Chart 16 Growth of Durant Obligations Compared to Other K-12 Spending

from School Aid Fund ........................................................................................ 47 Chart 17 Per-Pupil ISD Special Education Tax Yield Change: 2010 to 2011 ......................... 48 Chart 18 ISD Special Education Tax Levies: FY2001 and FY2009 ....................................... 49

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Citizens Research Council of Michigan

FINANCING SPECIAL EDUCAITON: ANALYSES AND CHALLENGES

FINANCING SPECIAL EDUCATION: ANALYSES AND CHALLENGES

Tables

Table 1 Special Education Enrollment Changes in Traditional Public Schools ........................ 7 Table 2 Student Head Count by Type of Public School: 2000 and 2010 .............................. 8 Table 3 Percentage of Special Education Students by Disability in 2007 ............................... 9 Table 4 Educational Setting of Students with IEPs Age 6-21 in 2010 ................................. 10 Table 5 Statewide Special Education Expenditures: FY1998 to FY2010 ............................. 13 Table 6 Transportation Spending: FY2007 to FY2010 ...................................................... 21 Table 7 State Reimbursement for Special Education Costs Associated with Durant ............. 26 Table 8 ISD Special Education Property Tax for Selected Years ......................................... 27 Table 9 ISD Tax Base Changes: 2007 to 2011 ................................................................ 28 Table 10 Special Education Property Tax Rates in Select ISDs: 2001 to 2010 ...................... 29 Table 11 Special Education Property Tax Revenue in 2010 ................................................. 30 Table 12 Special Education Revenues by Source: FY2001, FY2007, and FY2010 ................. 39 Table 13 Michigan Public School Employees Retirement System

Required Employer Contribution Rate ................................................................. 44

Illustrations

Illustration 1 Determination of State Aid Amounts ............................................................. 25 Illustration 2 Hypothetical Added Cost Model for Distributing ISD Tax Revenue ................... 34

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