Vermont special-education leaders say funding shortfalls and capacity gaps drive rising costs, urge regional programs

Three veteran special-education administrators told a Feb. 27 joint hearing of the Vermont Senate Education, House Education and House Ways and Means committees that growing intensity of student needs and gaps in funding are driving extraordinary costs for local school districts.

Mary Lynn Dean, executive director of the Vermont Council of Special Education Administrators, said federal law requires services for eligible students: "The Individuals with Disabilities Education Act guarantees students between the ages of 3 and 21 . . . are entitled to a free appropriate public education." She and other witnesses urged lawmakers to account for legal entitlements when considering state budget choices.

Why it matters: Special-education costs feed into the state's Education Fund, which is tied to property-tax choices, and rising out-of-district tuition, transport and intensive-service costs fall back on local districts and the state. Legislative members at the hearing pressed witnesses for practical reforms and for steps the Agency of Education could take to expand in-state capacity.

Panelists described three main cost drivers: an increase in the intensity of needs (more students requiring high-level behavioral or clinical support), high tuition and transportation for out-of-district placements, and staffing shortages across both general and special education. "IDEA has never been fully funded," said Chris Fenway, director of special services for the Slate Valley Unified School District and president-elect of the Vermont Council of Special Education Administrators. He told the committee federal funding reached about 11% in FY 2024 compared with a long-standing target of roughly 40%, and that the shortfall is borne by states and local taxpayers.

Funding mechanics: Witnesses explained the state shifted from a reimbursement model to a census-based funding model under Act 173. Under the older reimbursement regime, districts sought reimbursement after incurring extraordinary costs. Under the current approach, the state provides funding based on pupil counts and weights. Panelists said the Act 173 change increased local flexibility but did not eliminate very large per-student costs. The witnesses cited an FY 2026 extraordinary-cost ceiling of $67,638 per student; historically the threshold was $50,000. They said out-of-district tuition commonly can range from about $65,000 to $80,000 per year, with transportation sometimes adding $40,000 to $60,000 in annual cost for a single student.

Maintenance of effort and federal rules: Fenway and Dean stressed that federal IDEA rules include a "maintenance of effort" requirement that prevents states from using federal funds to supplant state spending. The agency reviews district spending year to year and can require districts to explain reductions or return federal funds if the maintenance tests are not met. Fenway described two common exceptions: staff retirements/unfilled positions and a student leaving the district or aging out.

Capacity and regional alternatives: All three witnesses recommended creating more intensive, regional programs as a way to keep students closer to home and reduce residential placements. Joanne Unruh, a retired special-education administrator, said strong local and state leadership is required to implement multi-tiered systems of support (MTSS) and to build regional capacity. "It's critical that the leadership is invested," Unruh told the committee. Panelists pointed to models in the Hartford area, where multiple supervisory unions partnered with health providers to create regional intensive programs.

Staffing and implementation challenges: Witnesses said staffing shortages affect both special and general education, noting many teachers on provisional licenses who are still gaining experience. That dynamic, they said, makes implementing high-quality universal instruction and early interventions more difficult, which in turn increases referrals to special education. The panel also described higher local responsibility when community mental-health partners lack capacity and students wait long periods'one witness said up to 11 months'for appropriate higher-level placements.

Medicaid and school-based services: Panelists said districts rely on school-based clinicians and Medicaid billing to help meet needs but that Medicaid reimbursements do not cover full costs. Fenway said districts can bill IEP-related Medicaid services and receive limited local reinvestment dollars, but the reimbursement rate is well below the actual cost of providing services.

Questions from lawmakers focused on whether Vermont remains an outlier in identification rates, how the pandemic affected eligibility trends, and how maintenance-of-effort rules would apply if districts regionalized or merged services. Panelists recommended protecting districts from steep fiscal volatility when regional program enrollment changes and urged the Agency of Education to increase statewide technical assistance, training and monitoring to support MTSS and regional program development.

No formal votes were taken at the hearing; the testimony will inform the committees' continuing review of the Education Fund and special-education costs.

Ending note: Witnesses thanked lawmakers and emphasized the work of school-based staff and community partners in meeting students' needs while urging state-level action to build capacity and limit extraordinary costs.