Task force reviews Kansas special-education funding: 92% excess-cost goal, $9 million "Medicaid replacement," and local transfers

The Special Education and Related Services Funding Task Force met (date and location not specified) for a multi-hour session focused on how Kansas calculates, distributes and audits special-education funding, and on near-term problems districts say they are facing, including staffing shortages, cash-flow timing and the distribution of a $9 million “Medicaid replacement” payment.

Members of the task force heard presentations from the Office of the Revisor of Statutes, the Kansas State Department of Education (KSDE) and the Kansas Legislative Research Department (KLRD) that reviewed the statutory “excess cost” funding formula, the mechanics of distributing state aid, recent 2024 law changes that affect local option budgets, and the limits of state reporting on outcomes for students with Individualized Education Programs (IEPs).

Nick Myers, of the Office of the Revisor, summarized how statute defines the statewide excess-cost calculation and the state’s funding goal. He explained that statute sets out steps to compute statewide excess cost — overall special-education expenditures minus the share attributed to regular education funding and minus other dedicated sources such as federal dollars or Medicaid reimbursements — and that “the total amount of special education state aid that shall be appropriated to school districts, is 92% of the excess cost determination,” as the statute frames the goal. Myers noted the statute also makes the 92% figure “subject to appropriation” by the Legislature and provides for prorating if the appropriation falls short of the statutory target.

How the state distributes the money

Task force members reviewed the sequence used to distribute whatever special-education state aid the Legislature appropriates. The top-line appropriation is first reduced by several categorical reimbursements, including: - catastrophic aid (reimbursement for extremely high-cost students), which statute calculates as a 75% reimbursement of costs that exceed twice the special-teacher reimbursement threshold; - a separate Medicaid-replacement payment currently capped at $9,000,000 and distributed by district based on the number of students who received Medicaid-eligible services; and - transportation and maintenance reimbursements, which the presenters said are reimbursed at a high share of actual cost (about 80% for transportation in the examples given).

Whatever remains after those categorical subtractions flows to the so-called special-teacher reimbursement, a per-FTE distribution based on each district’s count of special-education teachers and paraprofessionals relative to totals statewide. Myers also explained a 2024 statutory change: when total special-education state aid appropriations exceed a statutory threshold (the presentations cited $528,000,000), the excess amount is to be distributed under an “equalization” schedule the State Board of Education must develop rather than by the prior categorical split.

“Medicaid replacement” vs. Medicaid reimbursement

Several lawmakers pressed KSDE officials about the $9,000,000 “Medicaid replacement.” Frank Harwood, KSDE’s assistant commissioner for special education and related services, clarified the distinction: “The Medicaid replacement is not Medicaid funding. It is state funding,” he said, adding that the $9 million is a portion of special-education state aid set aside and allocated by a per‑Medicaid‑eligible‑student formula. Harwood said the replacement amount originated after changes in how actual Medicaid reimbursements were paid to districts and has been fixed at that level since the statute was adopted around 2008 and continued in 2010.

Legislators and staff asked whether the per‑student distribution is equitable because it divides a flat pot of money equally among Medicaid‑eligible students even though Medicaid‑eligible services — and their costs — vary across students and districts. Vice Chair Estes and other members referenced other states’ tiered or student‑based models as contrasts to Kansas’s flat‑pot approach.

Local option budget transfers and the weighting effect

Presenters explained how special-education weighting under the Kansas school finance formula factors into local option budget (LOB) authority. Because special-education weighting is computed from the dollar amount districts receive for special education and then expressed as a weighting that increases a district’s total foundation aid, it affects how much a district can levy under the LOB. A 2024 change in law also requires districts to transfer from their LOB (supplemental general) fund into the district’s special-education fund an amount attributable to the special‑education weighting the district generates.

KLRD analyst Matthew Willis and other speakers noted an important nuance: the excess‑cost formula already accounts for regular‑education dollars (including a statewide average of LOB support) when subtracting what regular education contributes to a special‑education student’s cost; the newly required mandatory transfer is a separate legal requirement and not subtracted from the statutory excess‑cost calculation the way federal funds and Medicaid reimbursements are. Task force members asked staff to model how treating the LOB transfer differently would change the state’s excess‑cost calculation; Myers and others agreed to provide follow‑up analyses.

Cash flow, carryover and staffing shortages

District finance and KSDE staff described two related practical problems: the timing of payments under the current reimbursement model, and the number of unfilled special‑education positions.

Harwood said KSDE currently waits to make an initial special‑education payment until after districts submit budgets and staffing counts in September, which delays the first payment until October. That timing, combined with district payroll cycles, means districts often carry cash balances to bridge the summer months. KSDE staff discussed a possible administrative fix — issuing an estimated partial payment based on prior‑year disbursements and reconciling later — and said the state’s current cash position would allow consideration of such a change.

KSDE and district officials also described widespread vacancies. Bert Moore, director of special education and title services at KSDE, recited figures from the spring vacancy report and said the state has hundreds of budgeted but unfilled special‑education professional positions and paraprofessional positions; Moore told the task force his spring vacancy report showed “557 open professional positions” and “447 paraprofessional vacancies” in the aggregate. Those unfilled budgeted positions are one reason some districts show multi‑million‑dollar special‑education cash carryovers: budgeted salary dollars were not expended because positions could not be filled.

The task force also heard examples of district impacts. Members cited Olathe and other large districts where catastrophic costs and transfers into the special‑education fund reduced local general‑fund capacity; Harwood said statewide transfers from general fund or LOB into special education in school year 2023‑24 were about $439,000,000.

Auditing and allowable uses

Presenters emphasized legal limits on how special‑education funds may be used and how KSDE audits claims. KSDE’s reimbursement guidance and audits review whether paraprofessionals claimed for reimbursement were assigned to licensed professionals, whether time‑and‑effort documentation supports claimed hours, and whether claimed costs match allowable categories. Moore said KSDE auditors will remove claimed hours when documentation does not support them.

Paraprofessionals and service delivery

The task force reviewed state rules about paraprofessionals’ duties and qualifications. Moore summarized the distinction between paraprofessionals in targeted Title programs and paraprofessionals in school‑wide programs, noting school‑wide aides must meet federal Title qualifications (assessment, 48 college hours or an associate’s degree) while paraprofessionals working under licensed special‑education professionals must meet KSDE’s baseline requirements (high‑school diploma or GED plus local orientation and training). Moore and other presenters described supervision expectations: paraprofessionals may provide practice and data collection under direct supervision and following initial instruction by licensed staff, but they cannot be hired or scheduled to supplant required licensed professional services.

Measuring outcomes

Several presenters and task force members noted the difficulty of producing statewide, aggregated outcome metrics for students with IEPs because goals are individualized. KLRD’s Matthew Willis told members there is little statewide reporting of IEP‑goal achievement; Bert Moore said that outcome measurement is driven at the IEP level and that “the goals must be measurable. So every goal has to have all of the SMART goals” (specific, measurable, achievable, relevant, time‑bound) and teams must monitor progress at least as frequently as general education monitoring. Task force members asked KSDE about whether the department could aggregate IEP progress indicators; KSDE said local IEP teams and local systems maintain much of that data and that pulling it into a consistent statewide measure would require additional specification and collection.

Next steps and materials requested

Task force members asked staff to provide follow‑up materials and analyses: historical timelines of lawsuits and funding changes (Montoy and Gannon litigation were discussed), fiscal runs showing the hypothetical effect of increased federal IDEA funding, the statutory and regulatory text governing Medicaid replacement and LOB transfers, and a KSDE memo on how private‑school students receive special‑education services and how those services are counted.

KSDE officials noted the current statutory excess‑cost funding formula expires with the 2026‑27 fiscal year, and task force members signaled interest in modeling alternatives — including student‑based weightings or tiered models — and in adding near‑term administrative changes (payment timing and clearer audit and transfer rules) to reduce district cash‑flow stress before any fundamental policy change.

The task force resumes work in a follow‑up meeting focused on student‑based weightings, model comparisons from other states and further fiscal modeling.