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Lawmakers probe special‑education funding, high‑cost contracts and district liability
Summary
Committee members heard Legislative Council and DPI briefings on state funding mechanics, special education student contract reimbursements, and a recent $22 million appropriation; members requested deeper study of alternative funding models and the consequences of resident‑district liability for open enrollment.
Legislators and staff began a focused review of how North Dakota funds special education and how the state reimburses for high‑cost and out‑of‑district placements. Sheila Sandis, senior fiscal analyst with Legislative Council, reviewed the study charge and summarized key finance provisions: the state reimburses school districts for high‑cost students through a student contract system and provides special education funding through the state school aid formula (weighted student units multiplied by the per‑pupil payment).
Why it matters: agency‑ and school‑placed contracts can exceed six figures and can quickly consume a school district’s resources; the committee heard that the state reimburses for ‘‘excess cost’’ above district liability thresholds, but committee members raised questions about liability when parents or other agencies place students out of their home district.
How the funding works: Adam Tesher, school finance officer at DPI, reviewed the school aid worksheet and explained the three separate funding mechanisms that commonly serve special education needs: (1) per‑pupil funding and special‑education weighting factors in the state school aid formula, (2) reimbursement for high‑cost students under the student contract line, and (3) federal IDEA Part B grants distributed to special education units. Tesher noted that a district’s weighted student counts — the special‑education weight (0.088), pre‑K special‑education weight (0.17), and ESY (extended school year) weights — are multiplied by the per‑pupil amount to generate state payments to districts.
Special education contracts and thresholds: the committee reviewed two contract types. Agency‑placed contracts apply when a state or county placing agency or a parent places a child in a residential facility; the resident district is responsible for the state average cost per student, with the state reimbursing amounts above that level. School‑placed contracts are for students the district places outside the district for education and are reimbursed when excess cost exceeds four times the state average per student. The committee heard that Century Code currently ties the reimbursement thresholds to statutory language and that the state’s legal framework treats the resident district as financially responsible for special‑education costs.
Recent appropriations and fiscal outlook: Legislative Council staff noted the Legislative Assembly appropriated $22 million (biennium) for special education contracts for 2025‑27 and estimated that foundation aid and other formula payments will provide several hundred million dollars across the biennium for special‑education services. DPI reported total IDEA Part B funding and the portion reserved for statewide activities; the department also noted the student contract line produced a large number of reimbursements in 2024‑25 that may exhaust the current appropriation if trends continue.
Open‑enrollment and liability concerns: committee members pressed staff and DPI on a consistent policy question: when a parent chooses to open‑enroll a student in another district, which district is financially liable for high‑cost special education expenses? Staff and DPI confirmed current statute makes the resident district financially responsible for special‑education costs even when the student enrolls elsewhere, and members discussed whether the committee should study alternatives — including tiered or categorical models used by other states — to align funding and financial responsibility more closely with the student’s educating district.
Next steps: committee members requested a deeper review of alternative state special‑education funding models (tiered or categorical systems), a cost estimate to change the statutory reimbursement formula (for example changing thresholds or the 4x multiplier), and additional breakdowns of student contract payments (school‑placed vs. agency‑placed) to quantify how many contracts are short‑term versus long‑term and the distribution of costs by district size.
