Helping Kids, Saving Money: How to Reform New York's Special Education System

The authors note that the problem of increased number of children in special-ed is largely a self-inflicted one.  There is little evidence to support contentions that increased disability rates are to blame. Indeed, the special education category which has grown the most in the 1990s, Special Learning Disability (SLD), is the one with the fewest objective standards governing its diagnosis, and hence the one most open to unintentional manipulation.

There is strong evidence that New York has unintentionally misidentified thousands of children as needing special education as a result of its special-ed funding formula. States use one of two methods to fund special education: a “bounty” system, which reimburses school districts for each child they designate, and a “lump-sum” system, which gives districts a net amount of money for special education each year which does not vary with the size of the student population.  New York employs a “bounty” system.

Critics of the bounty system argue that it encourages over inclusion of children in special education programs because school districts receive extra money for each child included.  Thus, a district with a child who is a slow learner receives extra money to pay for items like extra tutoring if that child is classified as SLD, but nothing if she is not.

Research suggests these perverse incentives are real.  Greene and Forster have studied the case of rising special-ed enrollments nationwide and found that states with bounty systems had a much higher rate of growth in special education population than those with lump-sum systems. Using regression analysis, they found that 62 percent of that additional growth is directly attributable to the bounty system.

Applying their calculations to New York, the authors find that as of the 2001 school year, 17,715 additional students were classified as special education than would have otherwise been had the state shifted to a lump-sum system in the 1994-95 school year.  These extra students cost state taxpayers $220 million-money that could be saved if the state changed its funding formula.

The authors also examined the results of Florida’s McKay Scholarship Program.  The McKay Program, adopted in 1998, gives parents of every special education child the choice to take a voucher for 100 percent of the amount the state spends on that child and use it at a private school.  As of the 2004-05 school year, 15,910 children (4.3 percent of Florida’s total special education population) use a McKay voucher.

The authors cite research showing that parents who use a McKay voucher are overwhelmingly satisfied with their child’s private school experiences.  Among the parents of students currently enrolled in McKay, 32.7 percent were satisfied with their previous public school.  However, when asked about their McKay school, that number reached 92.7 percent.

The authors conclude that adopting these two reforms-changing the special education funding formula to a lump-sum system and creating a universal special-ed voucher program-will improve New York’s educational outcomes and save taxpayers money.

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