Legislators review special education funding, data gaps as H.454 moves forward

A joint legislative session examined how Vermont funds special education, the federal rules that constrain state and local budgets, and preliminary estimates of how the House-passed school funding bill H.454 would change statewide special-education dollars.

The Office of Legislative Counsel and the nonpartisan fiscal office briefed committee members on legal requirements such as the Individuals with Disabilities Education Act and Section 504 of the Rehabilitation Act of 1973, and on two closely related funding concepts: “maintenance of state financial support” and “maintenance of effort.” Ezra Holden of the Fiscal Office said, “special education spending in fiscal year 2024 was about $448,000,000,” a figure that excludes most federal funds.

The discussion mattered because H.454, as passed by the House, would move special-education funding toward a census block grant and a weight-driven foundation model. Under the bill’s design the committee reviewed, special-education weights are tiered: category A (0.79), category B (1.89) and category C (2.49). Fiscal Office modeling using supervisory-union data produced a long-term weighted ADM of about 122,955 and disability-specific weighted ADM of about 25,332, which the office estimated would generate roughly $380,800,000 under the H.454 weighting structure. The fiscal office also noted an inflation-adjusted comparison of current spending to FY25 terms of roughly $465,000,000.

Committee members and staff repeatedly flagged uncertainty about “extraordinary” special-education costs and how they are coded in the agency’s expenditure data. Holden said the statewide dataset includes expenditures coded to special education and that some extraordinary-reimbursement codes are present, but added the fiscal office did not yet have a definitive total for locally borne extraordinary costs because some relevant costs may be recorded under different revenue or expense codes. The Fiscal Office also reported federal restricted special-education funding of about $37,000,000 for FY24, which is not included in the $448 million statewide nonfederal total.

Legal context guided much of the conversation. Beth St. James of the Office of Legislative Counsel reviewed IDEA’s parts (A–D) and said the law requires a free, appropriate public education and places conditions on state and local spending. “I am not a special education expert, and I am certainly not an expert on special education funding,” St. James told lawmakers, but she summarized that failure to maintain state financial support can reduce a state’s federal Part B, Section 611 grant the following year and that local education agencies that fail maintenance-of-effort rules may be required to return nonfederal funds or face other remedies. She also noted exceptions to maintenance of effort, including decreases in enrollment or termination of exceptionally costly programs.

Members asked whether the transition to a census block grant and the weighting approach could risk violating maintenance requirements or would leave districts underfunded. Fiscal Office staff said the Colby cost analysis underpinning the weighting structure estimates the funding the model would generate to achieve targeted outcomes, but that local effects will vary; some districts could see increases while others could see decreases when the model is collapsed to VSBA regions. Staff emphasized the need for additional data work—unsuppressing counts where possible, reconciling coding differences, and clarifying which expenditures should be treated as extraordinary—before making definitive district-level conclusions.

Committee members also raised implementation concerns. Witnesses and members said the Agency of Education’s rollout of past changes (Act 173 and related MTSS work) suffered capacity problems, including staff vacancies and pandemic disruptions; a consultant to previous hearings testified that successful implementation would require sustained support over multiple years. Holden and others suggested the Agency of Education’s requested staffing and contracting resources will be important to operationalize any statutory changes and to produce the reports called for in related legislation.

No formal votes were taken during the briefing. Committee chairs asked Ways and Means staff and the fiscal office to continue the data work over the summer and to produce more detailed reconstructions of extraordinary-cost coding and student counts to inform the next session.

The briefing closed with committee leadership asking members to collect questions and flags for follow-up work; staff said they will return with more granular data tying counts, primary disabilities and costs once coding and suppression issues are resolved.