Expert briefs Ways & Means on special-education funding in potential shift to foundation formula

Professor Tammy Colby, principal researcher at the American Institutes for Research, briefed the Ways & Means committee on the design choices and implementation risks of funding special education within a proposed statewide foundation formula.

Colby told the panel that “Special education services are authorized essentially by federal law, the Individuals with Disabilities Education Act,” and that the law creates an entitlement for eligible students whose needs are specified in individualized education programs, or IEPs.

Nut graf: Colby laid out the trade-offs lawmakers will face if Vermont moves from the current census-block grant model to a weighted foundation formula: how the state defines the formula’s base will change what weights must be to cover IEP-related costs; data gaps limit precise weight-setting; and the state must guard against incentives that push students unnecessarily into IEPs or more restrictive placements. She also flagged rapid growth in Vermont’s extraordinary-cost reimbursements as a question lawmakers should investigate before adopting a new funding structure.

Most important points

- Federal framework and constraints: Colby said federal law (IDEA) makes special-education services an entitlement and imposes conditions that states must follow when they accept federal funds, including maintaining at least the same level of State financial support year to year (maintenance of financial support). She emphasized that a state funding mechanism cannot create incentives that would push children into more restrictive placements than required by law.

- Three buckets of funding: Colby summarized that special-education spending typically comes from federal IDEA funds (a relatively small share nationally, roughly 11–17 percent depending on the state), categorical state special-education dollars, and state/local unrestricted dollars that districts must use to cover remaining costs.

- Design building blocks: Colby said states design special-education allocations with two core choices — a basis and a mechanism. Bases include total enrollment (the current Vermont census-block model), counts of students with disabilities, staffing/resource ratios, or historic/expenditure-based reimbursement. Mechanisms include weights (single or multiple), fixed-dollar grants, tiered grants, or cost reimbursement.

- Vermont’s current model and how it compares: Colby described Vermont’s 2017 census-block grant as using a 3-year average ADM basis and a fixed dollar grant (about $1,800–$2,200 per student). Vermont’s extraordinary-cost reimbursement triggers at around $60,000 per student, reimbursing roughly 95 percent for costs above that threshold and aiming for about 60 percent reimbursement below it through a complex calculation.

- Weights, bases and alignment: Colby stressed the interdependence of the base and any special-education weight. If the base does not include evidence-based investments such as tier‑1 early-intervening services, a weighted approach that only generates money for students with IEPs could leave those prevention services underfunded. “The weight itself is going to vary depending on what the base is because we’re generating those additional dollars,” she said.

- Options for multiple weights and tiers: Colby noted most states are moving to multiple weights or tiered systems that better reflect cost differences, but cautioned that disability categories are poor proxies for cost because costs vary widely within categories. She outlined alternatives states use: grouping disability categories into low/medium/high cost tiers, service‑intensity matrices, or metrics tied to time spent in general-education settings — each with trade-offs and federal constraints to avoid perverse incentives.

- Contingency (extraordinary-cost) funding and implementation questions: Many states pair weights with an excess-cost/safety-net mechanism (often a multiplier on the base, commonly about 3×). Colby said Vermont’s $60,000 threshold is high compared with many states and that Vermont’s extraordinary-cost spending has grown sharply; she recommended lawmakers examine why that growth is occurring and whether rules or reimbursement qualifiers should be changed.

- Regional service providers (BOCES/ESDs): Colby described regional educational service districts as one approach to scale services for low-incidence, high-need students. She said policy designers must decide whether ESDs receive state funding directly to cover fixed infrastructure costs or whether districts keep funds and buy services back from ESDs — or use hybrid models.

- Data and timing: Colby warned that available national data remain limited and that better, student‑level cost data are forthcoming from an ongoing national study. She recommended Vermont either use caution in selecting precise weights or invest in Vermont-specific costing and implementation supports during a multi-year transition.

Questions and follow-up raised by committee members

Committee members pressed Colby on practical issues that will matter to lawmakers: who initiates evaluations and IEPs (parents and districts can trigger evaluations but federal rules prescribe the procedures); the administrative burden and cost to districts and families of evaluations; Medicaid and other third-party reimbursement possibilities for services; balancing statewide policy priorities (for example, early intervention) with funding mechanics; and whether a phased rollout or multi-year transition would be needed if governance or base assumptions change.

Ending: Colby urged the committee to model options that align the base, weights and any regional governance changes and to treat extraordinary-cost growth as an item for closer review. She offered sources of technical assistance (national centers and federally funded technical‑assistance providers) and recommended the committee ensure the Agency of Education and any implementing entities have capacity and a clear implementation plan before adopting structural funding changes.