Task force reviews Kansas special-education funding formula, distribution and Medicaid role

The Special Education and Related Services Funding Task Force met May 20 in Topeka for a half-day briefing and discussion on how Kansas calculates, distributes and monitors special-education funding.

The meeting opened with a step-by-step explanation from Jennifer Light of the Kansas Legislative Research Department, who walked members through the statute-based “excess cost” reimbursement calculation that underpins special-education state aid in Kansas. Light told the task force that “the IDEA Act … requires states to provide special education services to children with disabilities between the ages of 3 and 21,” and that Kansas law (KSA 72‑34‑22) treats state aid as a reimbursement for excess costs above base funding and federal receipts.

Why it matters: The session clarified that Kansas’ approach treats special-education state aid as a reimbursement for costs that local districts cannot cover from base aid and federal funding. That structure produces a multistep calculation (general-education credit for special-education pupils, federal receipts including IDEA and Medicaid, and district expenditures rolled forward with an inflation factor) and a separate multi-bucket distribution of any appropriation the legislature provides. Several members said they want clearer district-level data to see whether the current distribution aligns with the calculated excess costs.

What the task force heard

How the calculation works — Jennifer Light (KLRD) and department staff laid out the state calculation in three broad parts: 1) estimate the general-education funding attributable to students who receive special education services; 2) subtract federal receipts (IDEA allocations, Medicaid reimbursements and other federal supplies) from total special-education expenditures; and 3) treat the remainder as excess cost and multiply that by the statutory reimbursement rate (92% under KSA 72‑34‑22), subject to prorating if the appropriation is insufficient. Light described the published green/pink/blue example sheets that KLRD and KSDE provided to the committee and walked members through the arithmetic used to move from student counts to dollar figures.

Federal receipts and Medicaid — The group probed how the state counts federal receipts. Dr. Harwood (KSDE staff) told the panel that “we actually use the actual receipts from that year” — meaning federal grant awards and KDHE-provided Medicaid reimbursement totals are used as prior-year receipts in the estimate. Committee members noted that Medicaid accounting is complex (fee-for-service versus managed care organizations), and KDHE provided calendar‑year 2024 Medicaid reimbursement data showing about $58 million to local education agencies (KDHE noted it would provide a fiscal‑year breakout later).

Distribution and statutory changes — The task force reviewed how state law divides any appropriation. House Sub. for Senate Bill 387 (2024) requires the legislature to appropriate at least $601,000,000 for special education beginning in FY2025 and directs a two-tier distribution: a hard $528,000,000 initial distribution (split into Medicaid replacement aid, catastrophic aid, transportation aid and special-education teacher aid) and a statutory process for allocating any additional appropriation above the $528,000,000. Light summarized the buckets and the statutory citations: KSA 72‑34‑40 (Medicaid replacement state aid) and KSA 72‑34‑25 (catastrophic aid), among others.

Key distribution rules the group reviewed

- Medicaid replacement: up to $9,000,000 distributed statewide and divided proportionally among Medicaid‑enrolled special-education students. - Catastrophic aid: districts may apply for reimbursement on costs above a statutory threshold; statute provides a 75% reimbursement for eligible excess above the threshold. - Transportation: statute reimburses 80% of special-education transportation costs. - Special-education teacher aid: the remainder of the $528,000,000 is allocated based on districts’ special-education teacher and paraprofessional FTE counts (paraprofessionals count as two-fifths FTE).

Members also discussed the law’s requirement that districts transfer a portion of local option budget (LOB) funds into the district Special Education and Related Services Fund. Department staff said KSDE’s FY2024/25 legal‑max and school‑budget runs will show that transfer and that KLRD and KSDE have posted the FY2024–25 excess‑cost calculations on the KSDE website.

District-level estimates and co‑ops/interlocals — KLRD analyst Matthew Willis presented an illustrative district-level application of the statewide excess‑cost calculation and cautioned that the exercise is an estimate rather than a statute‑defined district calculation. Willis highlighted implementation caveats: small districts with fewer than 10 special‑education FTEs required placeholder values in his run, and many services flow through interlocals or co‑ops, which complicates district‑level comparisons because those separate entities can report revenues and expenditures differently. Willis said the KLRD run shows substantial variation across districts in the share of estimated excess costs covered by state aid.

Concerns and open questions raised by members

- “It feels like a shell game,” Senator Gossage said, describing the way federal receipts are counted and then removed in the calculation. Several members asked for clearer, auditable descriptions of what the state counts as federal receipts and how KDHE and KSDE reports are reconciled. - Representative Williams pressed the group on the treatment of the at-risk weighting and the FTE basis for services, calling an FTE approach “an inherent flaw that was written into the formula” because it can undercount intermittent or lower‑minute services. - Several members asked for clearer statewide disclosure of how much local LOB revenue is actually transferred into special-education funds by district, and whether carryover balances in the special‑education fund are increasing as a statewide aggregate. - Members asked for more published, district-level reconciliations that show the KSDE/consensus estimating runs and the actual audited revenues and expenditures (including whether special-education state aid payouts ever exceeded district expenditures — KLRD’s illustrative run did not show state aid exceeding expenditures, but members asked for verification and audit‑level confirmation).

Other materials and national comparisons

Staff also distributed comparative materials from the Edunomics Lab (Georgetown) and the Education Commission of the States. Committee members reviewed other states’ approaches: multiple weightings, census‑based counts, resource allocation grants and high‑cost trust funds (some states set aside money for single extremely costly cases). Some states combine a pupil weight with a high‑cost reimbursement; others use categorical grants or prototypical‑school staffing models.

What the committee directed (discussion items, not formal votes)

- Staff was asked to assemble: district‑level reconciliations of excess‑cost calculations (including LOB transfers into SPED funds), the KDHE fiscal‑year Medicaid breakout for school reimbursements, audited district special‑education expenditures and fund balances, and updated KLRD/KSDE runs that reflect the post‑2024 statutory changes. - Staff (KLRD and KSDE) agreed to provide the FY2024–25 KSDE posted excess‑cost file, and KLRD said it will rerun district estimates once audited special‑education FTE and expenditure actuals are available. - Members asked staff to assemble examples of other states’ outcomes and whether states with certain models report improved outcomes for students with disabilities; staff noted the Edunomics and ECS repositories are starting points and pledged to collect additional state‑by‑state implementation details as requested.

Quotes from the meeting

- Jennifer Light, KLRD: “The IDEA Act … requires states to provide special education services to children with disabilities between the ages of 3 and 21.” - Dr. Harwood (KSDE): “We actually use the actual receipts from that year.” - Matthew Willis, KLRD: “This is truly an estimate and attempting to provide an understanding of how determining excess cost and then seeing the state aid via the distribution formula, kind of works.” - Senator Gossage: “It feels like a shell game.” - Representative Williams: “That is an inherent flaw that was written into the formula.” - Dean Zites (KSDE): “It ties back to the IEP.”

What’s next and what staff will provide

Task force members asked staff to prepare the following for the group’s next meeting and for broader interim review: - A fiscal‑year breakout of KDHE Medicaid reimbursements to LEAs (the blue KSDE sheet is calendar‑year 2024); - District‑level schedules showing audited special‑education revenues (state, federal, local transfers including required LOB transfers), expenditures and fund‑balance carryovers for the last several years; - Recalculation of KLRD district estimates using FY2024–25 audited special‑education FTE and expenditure actuals; and - Written summaries of how peer states run their distribution models, including whether any high‑cost trust funds or hybrid approaches have demonstrated improved access or outcomes.

No formal votes or policy changes were adopted at the May 20 session. Staff and agency speakers told the task force they will return with the requested reconciliations and additional state comparisons as the group prepares for policy discussions in coming meetings.

Ending

Task force members left the afternoon session with consensus that the statutory calculation and the distribution mechanisms are complex and generate widely varying district results. Members asked staff to supply audit‑level reconciliations and clearer, comparable state examples so the task force can evaluate whether Kansas’ reimbursement model, statutory buckets and LOB transfer rules are producing equitable and outcome‑focused funding for students with disabilities.