State special education funding shortfall leaves 2025 payments partially prorated, DOE explains process

Caitlin (Department of Education staff member) presented the department's explanation of the state special education funding formula and the recent shortfall that produced a partial proration of payments to districts. "The funding formula is in state law. It's RSA 186‑C," she said, describing the statutory mechanism that identifies costs above 3.5 times the state's average per‑pupil cost for potential state reimbursement.

Caitlin outlined the multi-step review process: districts compile allowable invoices tied to a student's Individualized Education Program (IEP); the department's special education bureau reviews invoices for allowability; the department applies the statutory caps (3.5× average per‑pupil, then additional tiers up to 10×) and calculates the state's portion (historically 80% of the excess, though the effective percentage varies with appropriation). "We figure out the total state's required amount for that kid and then prorate that amount in total," she said.

The department provided figures: allowable costs submitted statewide totaled roughly $119,000,000 for the referenced year; after applying the caps and statutory shares, the state's calculated liability would have been about $49,000,000. Because the department's appropriation for the payment was approximately $33,000,000, staff explained the payment was prorated to about 68% of the entitlement. "When we were working on the budget two years ago, that was the number that we felt would be sufficient to fully fund this obligation," Caitlin said, noting the department sets estimates using multi‑year data and is constrained by appropriations.

Committee members asked whether deeper invoice or rate reviews could identify cost drivers and whether more real‑time reporting by districts would help forewarn the legislature. Department staff said administrative resources are limited: federal IDEA funds pay a portion of special education administration, the department's state support is small, and the bureau relies in part on temporary staff to process invoices. "We do not evaluate price reasonableness across providers for every invoice," Caitlin said; she described existing rate-setting for approved out‑of‑district nonpublic schools but noted limited capacity for statewide benchmarking or invoice audits.

Staff suggested possible next steps: invite local business administrators and special education directors to explain local budget practices, and consider whether additional analytic capacity or statutory changes to reporting timelines could give the legislature earlier warning of emerging shortfalls.

Ending: The department offered to provide the committee historical data and to facilitate panels of local administrators; members asked staff to assess whether changes to reporting or appropriation mechanisms could reduce late-year uncertainty.