Minnesotas Adequate Education Laws--Special Education

What is an Adequate Education under Minnesota Law (Part II)
Special Education

In the first post of this series, I explained that there are two litigations pending in the appellate courts in which plaintiffs are trying to use Minnesota's Constitutional Education Clause to force urban school districts to improve public education for disadvantaged students.   One litigation, Cruz-Guzman argues that public education provided in racially isolated schools is not adequate for many students.   The second litigation, Forslund, argues that our tenure and seniority system subjects disadvantaged students disproportionately to incompetent teachers.  For some reason, the State of Minnesota defended these litigations, in part, by contending that the legislature, not the courts, must define what an adequate education is.  

As I said in the last post, this defense seems to JvonKorff on Education to be passing strange, especially coming from Governor Dayton and Commissioner Cassellius, because Minnesota has a robust and demanding definition of educational adequacy.  Of course it is the legislature's primary responsibility to define an adequate education, but the legislature has done exactly that, already.  Neither of the plaintiffs in these two cases needed the Courts to concoct a definition of adequate education: its right there in law already. 

This, then,  is the second in a series of posts examining each of the laws  that prescribe Minnesota's school districts educational responsibilities.  In the previous post, we looked at the World's Best Workforce Law.  This time, we look at Minnesota's special education law, which sets minimum standards impacting between 10 and 20 percent of students in most Minnesota school districts.

The Federal special education law requires Minnesota public school districts to provide  a "free appropriate public education" (FAPE) to all students who have a disability (that meets federal or state disability standards) in conformance with an individual education plan (IEP) in the least restrictive appropriate setting.  It is common for legislators to assert that special education is only a federal mandate, but actually the federal special education mandate applies only because the Minnesota legislature has passed laws implementing and accepting the federal special education requirement.     Moreover, Minnesota's special education laws are in a number of respects more demanding that the federal laws.   Legally, special education is an integral part of the state legislature's definition of the minimum adequate education that must be provided by local school districts.

Special education must be provided to resident students whether they attend public or non-public schools, at the cost of the public school district.  The special education student attending a non-public school receives the special education component at the district's expense, but must pay the non-public school's applicable rate of tuition.

Since the purpose of this series of posts is to rebut the contention that Minnesota lacks a legislative standard for "adequate education," we insert here at this juncture the central statutory legislative requirement, Minnesota Statutes Section 125.03:

(a) As defined in paragraph (b), every district must provide special instruction and services, either within the district or in another district, for all children with a disability, including providing required services under Code of Federal Regulations, title 34, section 300.121, paragraph (d), to those children suspended or expelled from school for more than ten school days in that school year, who are residents of the district and who are disabled as set forth in section 125A.02. For purposes of state and federal special education laws, the phrase "special instruction and services" in the state Education Code means a free and appropriate public education provided to an eligible child with disabilities. "Free appropriate public education" means special education and related services that:

(1) are provided at public expense, under public supervision and direction, and without charge;

(2) meet the standards of the state, including the requirements of the Individuals with Disabilities Education Act, Part B or C;

(3) include an appropriate preschool, elementary school, or secondary school education; and

(4) are provided to children ages three through 21 in conformity with an individualized education program that meets the requirements of the Individuals with Disabilities Education Act, subpart A, sections 300.320 to 300.324, and provided to infants and toddlers in conformity with an individualized family service plan that meets the requirements of the Individuals with Disabilities Education Act, subpart A, sections 303.300 to 303.346

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This special education mandate has substantive and procedural components.  It is designed around three basic principles.  The first is that students with disabilities have individual needs, and therefore require individual accommodations to assure that they can reach their maximum potential.   The second is that the reasonable accommodation should be provided in the least restrictive alternative and where reasonably appropriate in the regular classroom of the students' peers.  The third is that provision of special education services should be wrapped in a set of procedural protections that grant the student and the parent rights to participate in major decisions, and provide certain protections when the student violates disciplinary rules.  

The special education mandate has staffing implications:  in most school districts, the special education staffing teacher-to-student ratio is higher than for other students, and the teaching staff must have appropriate licensure and training to deliver services.   The mandate has implications for the delivery of instruction, because the classroom teacher must provide individualized accommodations, sometimes with assistance, to meet the student's needs.   And, it has financial implications, because the sum of state and federal financial support for provision of those services is roughtly 700 million dollars per year less than the statewide cost of providing those services. In addition, as we shall see in a subsequent post, the State monitors and critiques districts when their students fail to meet standards of proficiency. 

A full treatment of special education, like the World's Best Workforce topic in the past post,  is beyond our intended scope.

Part I in this Series:  World's Best Workforce

Special Education Update: Cross Subsidy Growth Cuts into General Fund Formula Increase

Yesterday, I began a discussion of the impact of the deficit in special education revenues as compared to total special education expenditures in Minnesota.  I pointed out that the total cost of special education in Minnesota has risen from $937 million in 1999 to $1.827 billion in 2011, essentially a doubling in 12 years time.    During that time, state and federal revenue provided to Minnesota school districts has increased from $584 million to $1.231 billion.  The total state shortfall between expenditures and revenues has thus grown from $353 million to $596 million. 

I presented a table showing the growth in special education cross subsidy for selected school districts.   Today, I want to emphasize that this growth in special education cross subsidy per student has a deleterious impact on the general fund revenue increases to school districts.  Commonly, when legislators tout their support for public education, they are inclined to tell us about the increase in the general education formula.  Now from 2004 to 2011, there were actually four years in which there was no general funding formula at all.   And so, school districts actually experienced a net loss in funding, when you net out the increase in cross subsidy against the funding formula.   But in those years that school districts do receive an increase in the general fund formula, the increasing cross subsidy subtracts substantially from the formula increase.

Now the cross subsidy represents the unreimbursed cost of special education divided by all students (not just special education students).   The cross subsidy comes out of the formula funding for all students, and so really, the net formula increase must be determined by subtracting the increase in cross subsidy from the general formula increase.

During the period 2004-2011, the general education formula increased 11 percent, whereas almost all of the selected school districts experienced substantially greater percentage increase in cross subsidy.  The formula increased from $4601 to $5124, an increase of $523 in that seven year time period.   But many school districts lost $300 to $400 as a result of increased cross subsidy.   After subtracting the net cross subsidy loss, for example, St. Louis Park experience an effective formula increase of only $115 dollars.   In other words, over that seven year period, St. Louis Park's effective total seven year formula increase, (after deducting the losses from special education cross subsidy increase,) was only 2 percent.  White Bear Lake's effective net formula increase was only $108.  St. Cloud's was $232 or a seven year total net formula increase of about 4.5% in seven years.  In short, these districts are receiving formula increases, (after deduction of cross subsidy), that is in the neighborhood of 1/2 percent per year or less, far below the rate of inflation.

Selected Districts	Cross	Subsidy		Net formula Inc
	2004	2011	Increase
St. Cloud 742	$569	$801	141%	$291
St. Louis Park 283	$540	$655	121%	$408
Minneapolis	$529	$905	171%	$147
Moorhead	$522	$682	131%	$363
St. Paul	$490	$837	171%	$176
White Bear Lake	$462	$877	190%	$108
Anoka	$446	$697	156%	$272
No St. Paul	$431	$743	172%	$211
Duluth	$422	$801	190%	$144
Sartell	$392	$428	109%	$487
Sauk Rapids	$390	$389	100%	$524
Rochester	$351	$518	148%	$356
Forest Lake	$344	$532	155%	$335
St  Michael	$308	$399	129%	$432
Cambridge-I	$265	$368	139%	$420
	$431	$642	148%	$312
Formula	$4,601	$5,124	111%

Special Education Update

Recently, the St. Cloud  Daily Times reported on  a study commissioned by our school district on our special education programs.  The report looked at the delivery of services, at cost of service, and compared what we are doing to other similar school districts.  The reason that the School Board commissioned a special education study is that special education is a very significant part of our district's budget, and because like all other school districts in Minnesota, we are compelled by the state to operate the program at a significant deficit.   Over the next months, our district will be examining the recommendations in this report and will be discussing how to address those recommendations.

In this post, I want to share some background information about trends in special education finance in Minnesota with some information as well about how our school district fits into those trends.

The total cost of special education in Minnesota has risen from $937 million in 1999 to $1.827 billion in 2011, essentially a doubling in 12 years time.    During that time, state and federal revenue provided to Minnesota school districts has increased from $584 million to $1.231 billion.  The total state shortfall between expenditures and revenues has thus grown from $353 million to $596 million.  The disparity in recent years has fluctuated partly because the legislature provided temporary relief from the rapid increase in deficit in 2007, and partly because of temporary special education relief in federal stimulus legislation.   By 2015, special education expenditures are expected to exceed $2 billion, while total revenues are projected to rise only to $1.38 billion.  By that time, the shortfall per biennium will have grown to substantially over $1 billion. 

This special education deficit is not equally distributed among school districts.  Different school districts have substantially different special education student percentages, reflecting differences in poverty, racial and ethnic makeup, differences in identification practices, location of hospital and youth treatment centers within districts, and proportion of students in private and charter schools.   Minnesota does not fund school districts based on the number of students with disabilities and degree of difficulty.  The funding formula begins by assuming that all school districts have the same proportion of students with disabilities, funding the district based on the number of students regardless of disability.  It then seeks to accommodate differences in cost by providing excess cost assistance, but that excess cost assistance is significantly less than the true excess cost for most districts.  The excess cost assistance provided has historically been appropriated based on a flat dollar amount, which is then prorated amongst districts with a claim on the excess aid.  As a result, school district have been receiving a smaller and smaller percentage of the excess cost aid to which they would otherwise be entitled.

The shortfall in revenues is generally reported based on total net cross subsidy divided by the number of all students in the district.    This cross subsidy per student is a measure of how many dollars must be pulled out of the regular student aid for each student (non-disabled and disabled) to fund the district’s special education shortfall. 

Before 2003, the State had been maintaining the total shortfall in special education funding at around $350 million.   The State has never sought to actually fund total special education expenditures.  No governor has ever proposed a budget that fully funds the state mandated expenditures, nor has either house of the legislature done so.  But, at the beginning of the Pawlenty administration the governor’s budget began to propose budgets which significantly increased the special education deficit, while at the same time, the Minnesota Department of Education began to increase its efforts to push districts to spend more.  Following 2003, the total shortfall in funding and the typical cross subsidies began to rise significantly.   In 2007, the legislature passed some temporary relief from projected increases, but still district special education shortfalls and cross subsidies have continued to rise.

The attached table shows selected larger school districts representative of the range in cross subsidy per student.  In 2004, our own St. Cloud school district had the highest special education cross subsidy of any of the state’s school districts of substantial size.  Its cross subsidy was $569 per student.  With just under 10,000 students, that meant that the school district was carrying a total special education deficit of $5 plus million dollars.  Historically, without a special education discretionary levy, the district, like many others, essentially covered the shortfall with an operating referendum of about the same amount, about 5.5 million dollars. Other representative school districts had cross subsidies ranging from $250 per student on up into the mid $500 range.

With the rising shortfall in special education funding, St. Cloud sought to find ways to limit its special education deficit by freezing its expenditures in most years.  Despite these efforts, however, our special education deficit rose to $801 per student, an increase of 41 percent.   The District’s operating referendum was no longer sufficient to cover the cross subsidy.    However, many other districts cross subsidies rose at a more rapid rate, and by 2011, St. Cloud no longer exhibited the highest cross subsidy of the significantly sized school districts, having been surpassed by Columbia Heights, Richfield, Minneapolis, Osseo, White Bear Lake, Robbinsdale, Burnsville, St. Paul, and Duluth.   These trends result from several hard facts.  The first is that state and federal maintenance of effort requirements have historically made it very difficult for any school district to actually decrease what it spends on special education.  The second is that state excess cost revenues have been gradually "pro-rated" so that even districts that attempt to cap expenditures can find themselves with larger and larger deficits.  I'll write more about issues in special education finance in future posts.

The table below shows that the growth in special education cross subsidy for many districts has a deleterious impact on a district's regular education formula increase.  During the period 2004-2011, the general education formula increased 11 percent, whereas almost all of the selected school districts experienced substantially greater percentage increase in cross subsidy.  The formula increased from $4601 to $5124, an increase of $523 in that seven year time period.   But many school districts lost $300 to $400 as a result of increased cross subsidy.   After subtracting the net cross subsidy loss, for example, St. Louis Park experience an effective formula increase of only $115 dollars.   In other words, over that seven year period, St. Louis Park's effective total seven year formula increase, after deducting the losses from special education cross subsidy increase, was only 2 percent.  White Bear Lake's effective net formula increase was only $108.  St. Cloud's was $232 or a seven year total net formula increase of about 4.5%.  In short, these districts are receiving formula increases, after deduction of cross subsidy that is in the neighborhood of 1/2 percent per year or less. 

Selected Districts	Cross	Subsidy
	2004	2011	Increase
St. Cloud 742	$569	$801	141%
St. Louis Park 283	$540	$655	121%
Minneapolis	$529	$905	171%
Moorhead	$522	$682	131%
St. Paul	$490	$837	171%
White Bear Lake	$462	$877	190%
Anoka	$446	$697	156%
No St. Paul	$431	$743	172%
Duluth	$422	$801	190%
Sartell	$392	$428	109%
Sauk Rapids	$390	$389	100%
Rochester	$351	$518	148%
Forest Lake	$344	$532	155%
St  Michael	$308	$399	129%
Cambridge-I	$265	$368	139%
	$431	$642	148%

Commissioner’s Education Funding Working Group strikes out on special education funding.

From time to time, a task force is convened to fix Minnesota's broken school finance system.   Every time that happens, the task force or commission runs up against a major problem:  the growing special education deficit.   Every time, the task force must decide whether to solve that problem, or to continue the current system, which shifts most of the burden onto a selected subset of school districts, primarily urban center districts, the Twin Cities, Duluth, and regional hubs like St. Cloud.   The basic problem has always been that whatever formula used, it works out that districts with high special education populations lose out and carry huge deficits. 

St. Cloud's current deficit is approaching $9 million.  Anoka's is rising beyond $28 million.  Minnesota's projected special education deficit is projected to be 700 million per year by 2013.  (See chart at the bottom of this blog post) The Education Finance Working Group has not adopted a final solution, but the news is not looking very promising for an honest,  courageous, and fair solution in special education.  It appears, based on postings at the MDE that the Commissioner's Education Funding Working Group has decided to put a few bandaids on the problem, and call it even.  

This blog may be unjust, and its author unfair.  I certainly hope so.  But it appears that the price tag is  too big to advance a straightforward solution.   And so, we are beginning to see, regrettably, once again, a bandaid solution that ignores the most significant and financially stifling problem facing education finance in Minnesota.   

There is one and only one possible solution to this problem, and that is to provide $700 million in additional revenues to local school districts, or to provide them with discretionary revenues to fund the part of the deficit which the State refuses to cover out of state sources.   True, the magnitude of this special education deficit problem could be cushioned by reducing state mandated spending.   For example, the State could eliminate spending mandates in excess of the Federal IDEA requirements.  But neither Republicans nor Democrats, nor the MDE Commissioner, nor anyone on the task force, apparently, is willing to advance this idea.   That means, evidently, that the Funding Working Group is apparently beginning with the assumption that special education costs will continue to rise unabated in Minnesota and that certain districts will continue to eat those costs.

As long as the task force insists in holding the cost side of special education harmless, there is only one honest, constitutional solution to this underfunding problem, and that is to close the funding gap with additional revenues.  Why will the task force not advance this simple straightforward solution?  The answer is that the education community in Minnesota has continued to enable the MDE, the legislature and the governor, in sweeping the special education funding problem under the rug, as if it was someone else's problem.  

Time after time, this issue has been addressed with half measures and evasions.  Time after time, the solution in Minnesota has to been to blame the federal government, and pass the deficit on to a subclass of local districts.    It is as if the representatives of the education in Minnesota has agreed to the proposition that the Emperor has new clothes.  They say, "we have a 700 million dollar annual special education deficit in Minnesota:.  If we solved that problem in a straightforward way, it would cost too much money, so lets not bother trying."  

And so, the Working Group appears headed once again to place bandaids on special education funding..   Various funding formula devices seem to be under discussion, none of which even remotely equalize the burden.   Some form of minor cost shifting in favor of "receiving" districts is under consideration, it appears.  The result would be modest adjustments still leaving great gaping holes in special education funding to be carried by the unfortunate districts who are designated to carry the load for the entire state.   

Again, I would be happy to be proven wrong.  If my interpretation proves unjust, I'll be the first to extend my apologies.  But it appears that the Working Group is going to continue the Minnesota practice of balancing the education budget on the backs of a few districts once again while calling the result a "Miracle."  

At the same time, it appears, the funding working group is toying with the idea of actually limiting the role of local taxation in solving the shortfall for the disfavored districts.   Most school districts that are carrying humongous state mandated special education deficits survive by passing operating referendums. Yet, it appears that the Working Group is operating under the mistaken belief that constitutional equality means denying revenue to districts with higher state mandated special education deficits.   The Working Group seems still to be operating under the philosophy that was actually rejected in the Skeen decision, to wit, that the constitution requires equality of funding sources.  In fact, the Constitution requires exactly the opposite.  The Constitution demands that when the state shifts greater costs onto a local district, that the State must provide a revenue source, state or local, to cover that deficit. 

Having denied local school districts state revenues to close their state mandated special education funding, logic would suggest that then the Working Group would provide local districts with local revenues to equalize the burden.  But instead, the working group appears to be going in the opposite direction.   The motto of the Working Group appears to be the same as other task forces in the past:   Equalize everything except for special education.   Make everything fair, except for special education, which is, well just too hard to solve to make things fair.  

Listen.   Any solution that fails to equalize the special education burden in Minnesota is doomed to failure.  It is not constitutional.  It is not just.  It is nothing more than a way for the districts with lower special education responsibilities to gang up on the subgroup of school districts who have high and costly responsibilities.   And, such a solution fails cannot withstand constitutional strict scrutiny and is destined to be struck down.  

Other posts on Special education finance:

• Does Dayton Budget Attack the Special Education Deficit

• Excess Cost Pro-Ration

• House Omnibus Bill Buys formula increases with Special education cuts