Funding May Push Special Ed Labeling

The percentage of students classified as having a disability varies widely from state to state. A child in Maine is 74 percent more likely to be identified as disabled than a child in California.

And before you ask, it’s not the lobster diet or the snowy Maine winters that produce so many disabilities. It’s much simpler than that. It’s the money.

An important part of the difference between Maine and California is the formulas states use to fund special education. In most states, including Maine and Georgia, schools get additional state funding as more students are placed into special education. It is not hard to see how this provides schools with an incentive to diagnose students with learning disabilities even if they aren’t truly disabled.

But isn’t special education a drain on school budgets?

Yes, schools incur additional costs when students are classified as disabled, but they also receive extra revenue. For the mildest and most common special education category, called specific learning disability (SLD), the extra state funding is often greater than the additional cost. This has led to explosive growth in SLD rates. Today, one in 20 public school students are diagnosed with SLD.

Some states, such as California, have revamped special education funding formulas to reflect historical rates of disabilities and their demographic characteristics. This “census” method of funding keeps schools from receiving additional money for putting more students into special education. Not surprisingly, states that have adopted this approach have significantly slowed growth in special education rates.

Consider Georgia. While boasting a lower percentage of students in special education than most states, the number of new diagnoses had been trending upward. Between 1998 and 2006, Georgia’s special education rate grew twice as fast as the national average. Then in 2007, the most recent year for which data are available, special education rates dropped dramatically from 12.1 percent to 11.3 percent, a net decline of 7,386 students. What happened?

Part of the explanation lies in Georgia’s special education voucher program. The program offers all students identified as disabled the opportunity to use state funding to pay for tuition at a private school. As of 2007-08, the first year of the program, there were 899 students using these vouchers.

That’s impressive. But what about the other 6,500 or so kids that disappeared from Georgia’s special-education rolls between 2006 and 2007?

The voucher program may have helped restrain special education growth by altering the financial incentives. Georgia public schools still get extra money if they classify a student as disabled, but now they also risk losing that student along with all his funding. Vouchers ensure that schools think twice before placing students into special education simply to get added revenue.

This may be what is happening in Georgia. We have found clear evidence that a similar program has restrained special education growth in neighboring Florida. That state’s McKay Scholarships for disabled students � the template used to design Georgia’s program � has been operating since 1999 and has more than 20,000 participating students.

In a recent study for the Manhattan Institute, we found that a student attending a Florida public school with an average number of voucher-accepting private schools nearby was 15 percent less likely to be newly diagnosed with a specific learning disability than if the program had never been introduced.

Obviously, we don’t want schools underidentifying disabilities for financial reasons. Thankfully, there appears to be little danger of that happening.

vWith already sky-high special education rates continuing to grow rapidly, we are more concerned with preventing states like Georgia from following the path of states like Maine, where nearly 1 in 5 students are classified as disabled. Special education vouchers may rebalance the financial incentives surrounding disability diagnoses and foster responsible placement of students into special education.