Committee hears fiscal note for House Bill 168 to fund special-education preschool services

Helena — The House Education Committee met to consider the fiscal impacts of House Bill 168, which Representative Jonathan Karlen, who represents House District 98, said would add A and B state funding for special-education services provided to 3- and 4-year-olds.

Karlen said the statute in the packet ("27 4 11," as cited in testimony) requires school districts to provide special-education preschool services and that the bill would fund those services based on aggregate hours of service rather than full-day enrollment. "This bill provides A and B funding for special education services that school districts are mandated to offer for 3 and 4 year olds," Karlen said during opening remarks.

Proponents told the committee the proposal would reduce local pressure to raise permissive levies for special education. Rob Watson, executive director for Montana school administrators, cited the fiscal note line that says, "local property taxes will increase by approximately $766,000 each year beginning in fiscal year 27," which he read as part of the note but said the bill could reduce permissive-levy pressure in practice by shifting some costs to the state. Watson gave district examples: Belgrade receives about $14,000 in federal funds for its special-ed preschool but spends about $204,000; Kalispell receives about $43,000 and spends about $444,000.

Several witnesses, including Grace Decker of Montana Advocates for Children and Jennifer Hensley of Ability Montana, described how funding streams change at age 3: some early-intervention services before age 3 are community-based or run through DPHHS, but after age 3 a child's services are typically coordinated and paid through the school district and the child's IEP. Dr. Molly Blakely, superintendent at Hellgate Elementary School District in Missoula, said Hellgate receives $13,195 but spends $225,601 to run its special-education preschool, and that her district serves 34 students in early literacy and 17 in special-education preschool, noting the two programs serve different populations and needs.

Committee members pressed for details on overlap with DPHHS programs and on Medicaid billing. Watson said districts already bill Medicaid for therapy provided to Medicaid-eligible students with IEPs and that billing has historically reimbursed only a portion of districts' total special-education costs: "When I was the superintendent in Missoula, we billed approximately $200,000 a year in Medicaid reimbursed for our IEP students," he said. Members asked whether including 3- and 4-year-olds in A and B funding would amount to "double dipping" if districts also billed Medicaid; witnesses replied that the funding streams target different parts of cost and that additional state A and B funding would not fully duplicate Medicaid reimbursement.

Several members sought a mechanism to ensure permissive levies would decline if state funding increased; Karlen said the bill contains no explicit requirement to reduce levies and that he would look into options but could not point to a specific statutory mechanism. He also noted legislative history that state funding for preschool special education existed prior to the early 1990s and was later removed during school funding reforms.

The hearing closed with Karlen offering to provide the committee additional fiscal detail on how district general funds, permissive levies and billable Medicaid services combine to fund preschool special education. The committee took no formal vote on House Bill 168 at the hearing and did not adopt or reject the fiscal note.