Special Education: Budgeting It, Funding It, Accounting for It

The second in a series for Andover taxpayers

August 22, 2013 • Saved under Committees
By Charlie Darling, Beacon staff

In the August issue of the Beacon, Colby-Sawyer intern Aaron Hodge wrote a basic introduction to special education in general. In this article, we’ll dig into the extremely complex question of how we budget, fund, and account for special education in Andover.

The Beacon is still planning a future article to try to answer the question, “Does special education benefit the Andover community?” We’re asking anyone who can speak from personal experience on that subject to please contact the Beacon right away.

To date, no one has come forward: Should we not be working on answering this question?

The Challenges of Funding Special Education

This is not only a complex subject, but it’s also a subject that’s too important to the Andover School District and its parents, students, staff, and taxpayers to ignore. This challenging mix of complexity and importance stems from these facts:

  • It’s expensive: Special education accounts for about 15% to 20% of the total School District budget, or about 12% of Andover’s total tax burden – about $450 of the $3,700 tax bill for a $200,000 home.

  • It’s not optional: As explained in the earlier article, federal law mandates that every school district provide special education services, and it dictates the standards to which those services must be provided. Failures to meet those standards can spark law suits and/or withholding of federal or state funds.

  • It’s uncertain (part 1): Special education covers a very broad spectrum of services. Examples might range from a few hours of Occupational Therapy for a three-year-old to learn to grasp a pencil; to $100,000 per year for 18 years for an out-of-district residential program (an extreme case for any community, and one that has never happened in Andover … but could).

  • It’s uncertain (part 2): Families whose child or children need special education, at whatever level, can move into town or out of town at any time, with no prior notice.

  • Our defenses against the uncertainty are not robust: As you’ll read below, leaving leeway in the budget for unexpected special education needs is not very effective. State aid is minimal and ill-timed. Andover’s special education trust fund isn’t very large. And the school district has no reserve against a special-education lawsuit.

  • There are consequences of being wrong: You’ll read below how guessing wrong on Andover’s special education funding needs in a given year can trigger a variety of unpleasant consequences, including some combination of a deficit appropriation, a supplemental appropriation, petitioning the court, a special School District Meeting, and/or a second tax bill.

Diving into this complex, important subject is difficult, not least because each year’s funding decisions look backward to what has happened in the past as well as look forward to what might happen in the future. Let’s start with the budgeting process, the point at which the looking-back and looking-forward is at its most intense.

Budgeting for Special Education

Let’s focus on three consecutive school years: last school year (July 2012-June 2013), this school year (July 2013-June 2014), and next school year (July 2014-June 2015). Right now, in the fall of this school year, with the school year just getting underway, the School District is starting to prepare the budget for next school year. That budget will be presented to the Andover Budget Committee in December; voted on by Andover School District Meeting next March; and come into effect next July.

At this point, stop and ask yourself, “What’s available to the School District right now to prepare the budget for the next school year?” Your answer should be the following:

The School District knows:

  • what was budgeted for last school year and what was actually spent

  • what was budgeted for this school year, but not what was actually spent (because the year has barely started)

So in terms of basing next school year’s budget on Andover’s actual demand for goods and services and the money actually spent on those goods and services, the School District is relying on data (from last school year’s budget) that will be as much as two years out-of-date by the time the budget (for next school year) that they base on that data takes effect (next July).

This lack of good, up-to-the-minute data is cited by many as one reason to leave some leeway in the budget: The four-month budgeting process (September through December of this year) has to start, by law, about nine months before the budget will take effect (in July of next year), at a point well before this year’s budget (for July of this year through June of next year) has had a chance to prove its merits and reveal its flaws.

Another often-cited reason to leave slack in the special education budget is that special education in particular is subject to outside forces that are impossible to predict. A student needing special education could move into (or out of) the Andover School District tomorrow, with absolutely no warning, making a mockery of the School District’s attempts to understand and predict (a year ago, based on two-year-old data) the current year’s special education budget.

As noted in the earlier article, in Andover the odds are pretty good that the hypothetical special education student who moves into or out of town unexpectedly won’t have a huge impact on the budget: in a typical year, over half our special education students receive their help at AE/MS and at a manageable cost.

But what keeps the budgeteers awake at night (and should haunt the dreams of every taxpayer, too) is the improbable-but-not-impossible chance of a new special education student with very, very expensive needs moving to town. In that scenario, however, there’s no reasonable amount of budget leeway that would handle the situation. Which leaves us with the question, “If the improbable-but-not-impossible scenario does come to pass, what then?”

When Leeway Isn’t Enough

You may have heard that the state provides “catastrophic aid” to school districts for funding special education in some circumstances. Roughly, the state will provide a certain level of financial help to the school district when the special education costs for a given student in a given year exceed 3.5 times the state average (the math works out to a threshold of about $46,000 currently); the state will help with a higher level of financial aid when the special education costs for a given student in a given year exceed 10 times the state average (about $132,000).

The two levels of “catastrophic aid” are 80% and 100%. The state looks at 80% of the special education amount the school district spent on a given student above about $46,000 and 100% of the amount over about $132,000. That’s the school district’s “entitlement” under RSA 186-C:18. The Department of Education then prorates that entitlement – currently, at about 72% – and that’s what the school district actually gets for catastrophic aid.

An example shows how little help state catastrophic aid really offers. Several years ago, the state determined that the Andover School District had spent more than 3.5 times the state average on one student, making us eligible for state help with that unexpected expense.

For the $82,750 we spent on that one student, our catastrophic aid “entitlement” was $30,847 (80% of the excess over 3.5 times the state average), and the actual aid we would receive (a year after we’d spent the money), at 69.0160% (the proration figure at the time) of our entitlement, was $21,289, or about 26% of what was probably an unexpected $80,000 hit to the School District budget.

If you visit the state Department of Education Web site at TinyURL.com/NH-Catastrophic-Aid, you can study the past six years of state records for catastrophic aid to school districts. The totals on the report from the state’s last fiscal year suggest that the example above is representative: the total aid the state paid in FY 2013 was only about 27% of the total amount school districts spent on special education cases that exceeded 3.5 times the state average.

In three of the six years’ reports on the Web site, Andover qualified for no catastrophic aid. That’s a good thing, both for our students and for our taxpayers.

Too Little, Too Late

The problem with relying on state catastrophic aid as a protection against unexpected special education expenses is not just that the amount the state provides is inadequate. Even if the payment were 100% and/or kicked in at lower levels of “catastrophe,” the timing of the aid would still cause serious problems for a school district, because the state doesn’t actually cut checks to school districts for catastrophic aid until the following fiscal year. School districts are left on their own to pay the bills when a catastrophic case is actually in progress.

Back to the example of catastrophic aid to Andover mentioned above: In the year when the special education for that student was being delivered, the School District had to come up with the whole $82,750 by taking it from other parts of the total school budget. That meant that some thing(s) that the voters had funded at School District Meeting actually went unfunded that year. And that would have been the case even if the state had reimbursed us the entire $82,750 (which they didn’t; see above), because the reimbursement wouldn’t have arrived until the following budget year.

When Special Education Busts the Budget

So far, the story is far from pretty, but as in the case described above, with some juggling and some short-term belt-tightening, we manage.

But what if the Andover School District were to face an unexpected special education expense so big that it couldn’t realistically be covered by taking money from other parts of the current year’s budget? While that scenario is both historically and statistically unlikely, the possibility of a “perfect storm” of special education needs in Andover (almost certainly involving multiple families and/or multiple catastrophic cases) means it’s certainly not impossible.

If an unexpected rise in special education expenses in a given school year couldn’t be absorbed by that year’s school budget, the Andover School Board would look first to its trust fund reserve for special education. This fund was established by the Andover School District Meeting on March 11, 2000 specifically to provide a buffer against unexpected special education expenses. Its balance currently stands at $69,000; School District Meeting has not added any money to the fund since it was created. That $69,000 is a nice sum, but it’s hardly shelter from a “perfect storm.”

If Andover’s trust fund for special education weren’t enough to weather the storm, the School Board would have no choice but to ask the taxpayers for more money. This would happen in one of two ways:

A deficit appropriation would allow the School District to overspend its budget for the current year. The deficit amount incurred in the current fiscal year would then be added to the following fiscal year’s budget, and the taxpayers would pick up the tab on their regular tax bill for the following fiscal year.

A supplemental appropriation would allow the School District to increase its budget for the current year to avoid running a deficit. If the supplemental appropriation were approved before the tax bills for the current fiscal year had been calculated, the taxpayers would see the impact of the budget increase in their tax bills for the current fiscal year.

If, on the other hand the supplemental appropriation were approved after the tax bills for the current fiscal year had been calculated, then the supplemental appropriation would have to be raised by sending a second tax bill, this one just for the supplemental amount.

In dealing with a sudden and unexpected special education expense, timing is everything. If it becomes clear between July (the start of the School District’s fiscal year) and February (just before the annual School District Meeting) that an unexpected special education expense has busted the current year’s budget, either a deficit appropriation or a supplemental appropriation can be brought before the regular annual School District Meeting and dealt with there – either by kicking the problem into the next fiscal year with a deficit appropriation for the current fiscal year, or by passing a supplemental appropriation for the current fiscal year and triggering a second tax bill, supplemental to the previous calendar year’s tax bill.

If, on the other hand, an urgent problem appears between March (too late to go to School District Meeting) and June (the end of the School District’s current fiscal year), the School Board could only deal with the problem by having its attorney petition the state court for a special School District Meeting at which the voters would consider either a deficit appropriation or a supplemental appropriation for the current fiscal year, as described above.

Accounting for Special Education

As if budgeting and funding special education weren’t tricky enough, the way we account for special education dollars as we spend them only adds to the problem.

The state dictates what line items each school district uses in accounting for its receipts and expenditures; those state rules dictate that special education expenses be spread across several different line items, making it a challenge to discover the total special education expenses for a given year (especially, as it turns out below, when you’re looking at the budget for the coming fiscal year).

My Take

How can I boil down this whole article so funding special education makes sense for the average Andover taxpayer? I don’t have a good answer to that question, but I will share a few opinions:

1) Any discussion of funding special education can’t be “boiled down” – there are too many moving parts, and each one is too important to the operation of the whole to be eliminated or ignored. If you want to participate in the discussion of how Andover funds special education, you’re just going to have to resign yourself to learning a lot of pretty complicated stuff.

2) Ultimately, the discussion is all about risk-taking. No matter how you tweak and twist all the moving parts, it appears to me that there is no solution to funding special education that is A) risk-free, B) fiscally responsible, and C) politically do-able. That means we’re thrown back on our individual abilities to perceive and assess levels of risk, and our intuitive reactions to the levels of risk we see. (Science has shown repeatedly that humans’ reaction to risk is far more emotional than logical.) So each year the solution has to emerge from a wide variety of visceral and often irreconcilable reactions – hardly the formula for a good, workable solution that everyone can live with.

3) Because there’s no good, logical answer to funding special education, the discussion itself can be difficult and divisive. Town Meeting and School District Meeting have proved over and over that when the people of Andover come together as a legislative body, we’re pretty good at finding a pretty good solution to most funding problems we face. But based on all of the above, it appears to me that the problem of funding special education is so much more complex and risky than most funding problems that we face that we can’t necessarily expect our usual vigorous give-and-take to yield a pretty good solution. The problem of funding special education is so much more challenging than other problems we face that we may need a different approach to the way we search for a solution each year. I just wish I knew what that approach might be!

4) I think I do know one important part of that different approach: Everyone in the discussion needs to be well versed in all the intricate moving parts discussed in this article; and they need to have access to accurate, timely data and historical data about special education in Andover, both the demographics and the finances. The data needs to be thoughtfully prepared and presented for the specific needs of its intended audience, and the supporting detail (within the limits imposed by privacy regulations and concerns) needs to be readily available. These are very high standards, indeed, but it’s the only hope I can see of making the discussion of special education funding go a bit more smoothly and ultimately produce a result that is more satisfying to all concerned.

– CD

To figure out what’s going on with the funding of special education in Andover, you have to turn to the School District budget on pages 69 through 71 of the 2012 Andover Town Report. (You can find the 2012 Town Report online at TinyURL.com/Andover-NH-Town-Report-2012.) Special education expenses are spread across:

  • Line 1210 Special Education Programs ($516,984 in the Budget Committee’s budget for 2013-2014)

  • Line 1211 Special Education Summer Programs ($4,401)

  • Under line 2100 Student Support Services, the line item called Purchased Technical Services ($87,720) covers the cost of professional services for speech, occupational therapy, psychology, vision, and Medicaid billing.

  • Line 2722 Transportation – Special Education ($86,550) covers both out-of-district transportation to a facility like Spaulding Youth Center, for example, or Crotched Mountain Rehabilitation Center, as well as in-district transportation for special education students who aren’t able to ride the regular buses.

  • Line 5252 Expendable Trust – Special Education ($0) sets money aside as a buffer against sudden and unexpected Special Education expenses in the current or a future budget year.

Add ‘em up, and the 2012 total for special education expenses comes to about $695,270. That amount does not appear anywhere in the Town Report.

On the revenue side, the Catastrophic Aid line item ($12,500) on page 72 is the School Board’s best guess on how much reimbursement we might receive this year for the previous year’s special education catastrophic aid – as noted above, perhaps just 26% of the amount we actually spent that year on the case or cases the state deemed “catastrophic.”

Also on page 72, Medicaid Distributions ($15,000) is the result of billing Medicaid for certain allowable special education expenses. Reserve for Special Education Trust ($0) is the amount added this year to the reserve account to be used in case of sudden and unexpected special education expenses. As described above, the current balance of the reserve is about $69,000.

At the bottom of page 72, you’ll see the total special education expenditures and total revenues for each of the two prior fiscal years, as required by state law. State law doesn’t require the corresponding totals for the current year’s budget, though you can work it out for yourself based on the information revealed above.

The Wheel Turns

We’ve covered budgeting, funding, and accounting for special education, and that pretty much covers one yearly cycle. At this point:

  • Go back to Budgeting, above, taking into account what accounting tells you about last year’s performance, and make a budget for next year.

  • When “next year” arrives, try to stay within the budget you’ve set, taking extraordinary funding steps if surprises bust the budget.

  • Account for every penny you’ve spent according to state standards.

The cycle’s done for another year. Go back to the top and start again.

The Beacon is planning a future article to try to answer the question, “Does special education benefit the Andover community?” If you can speak from personal experience to help us answer that question, please contact the Beacon right away.

To date, no one has come forward. Should we not be working on answering this question?