Education Policy Research
School funding, special education budgets, and how districts respond to fiscal constraints. We analyze maintenance-of-effort requirements, stimulus effects, and the gap between federal promises and funding reality.
The Unfunded Mandate: Special Education's Broken Promise
When Congress passed the Education for All Handicapped Children Act in 1975 (now known as IDEA—the Individuals with Disabilities Education Act), it made a promise: the federal government would fund 40% of the excess cost of educating students with disabilities. This was a reasonable commitment, designed to ensure that the new mandate for special education services wouldn't burden local school districts.
Congress has never kept that promise. For the past 50 years, federal IDEA funding has hovered between 13% and 18% of excess costs—never approaching the 40% target. The gap between promise and reality now exceeds $25 billion annually, a burden that falls on state and local budgets.
This matters because special education costs have grown faster than general education spending. More students receive services (the percentage of K-12 students with IEPs has increased from 8% to 15%). Those services have become more intensive. And the cost of specialized personnel—speech therapists, school psychologists, special education teachers—has outpaced average wages.
How Districts Respond to Fiscal Constraints
School districts face a difficult choice when budgets tighten. Special education is largely protected by federal law: IDEA's maintenance-of-effort (MOE) requirement means districts cannot reduce special education spending below prior-year levels. But general education has no such protection.
Our research examines how California school districts responded to the Great Recession. The state's MOE floor—enacted in 2008—prevented an estimated $1.2 billion in special education cuts. But those cuts didn't disappear. Districts shifted them to general education instead. Class sizes increased. Teacher layoffs accelerated. Programs were eliminated. The MOE floor protected special education students but transferred the burden to everyone else.
This pattern reveals a fundamental tension in education finance. Legal protections for one category of spending create pressure on unprotected categories. When budgets contract, something has to give. The question is what—and who decides.
The Stimulus Paradox
The American Recovery and Reinvestment Act (ARRA) of 2009 provided unprecedented federal support to schools during the Great Recession. Over $100 billion flowed to education, including $11 billion specifically for IDEA. The funding saved jobs, prevented immediate cuts, and helped districts weather the worst years of the downturn.
But stimulus funding created its own problems. Districts that used ARRA to maintain staff and programs faced a "fiscal cliff" when the money expired. By 2012, many districts were worse off than if they had made gradual cuts from the beginning. The temporary funding had delayed painful decisions rather than preventing them.
This matters for future policy. When the next recession hits—and when the next round of emergency education funding arrives—policymakers and district leaders should consider whether temporary relief might create larger problems down the road.
The Spending Puzzle
Special education spending varies enormously across California school districts—from under $8,000 per student to over $25,000. What explains this variation? Is it differences in student needs? Differences in service intensity? Differences in wages? Or something else entirely?
Our research decomposes spending growth into its component parts: changes in the number of students served, changes in the types of services provided, and changes in the cost of delivering those services. The results suggest that much of the variation comes from choices districts make about service delivery rather than from differences in underlying student needs.
Understanding what drives spending is essential for policy. If high-spending districts achieve better outcomes, their practices might be worth emulating. If they don't, something else is going on—and that something else might represent an opportunity to deliver services more efficiently without harming students.
Key Research Findings
50 Years of Underfunding
Federal IDEA funding has never approached the promised 40% of excess costs. The actual share—typically 13-18%—leaves states and districts to cover a $25 billion annual gap.
MOE Shifted Cuts
California's maintenance-of-effort floor prevented $1.2 billion in special education cuts during the Great Recession—but districts transferred those cuts to general education instead.
Stimulus Fiscal Cliff
ARRA funding helped districts weather the recession but created a fiscal cliff when it expired. Some districts ended up worse off than if they had made gradual cuts from the start.
3x Spending Variation
Per-student special education spending varies more than 3-fold across California districts, driven largely by service delivery choices rather than underlying student needs.
How California Protected Special Ed, Then Shifted Cuts
California's 2008 maintenance-of-effort floor prevented $1.2 billion in special education cuts during the Great Recession. But districts found another way: they shifted cuts to general education instead.
Stimulus Saved Schools, Then Made Things Worse
ARRA provided crucial funding during the Great Recession, but created a fiscal cliff when it expired. Districts faced worse budget situations than if they'd made cuts earlier.
The Unfunded Mandate: 40 Years of IDEA
When IDEA passed in 1975, Congress promised to fund 40% of special education costs. Four decades later, federal funding covers just 15%. The gap falls on states and local districts.
The Special Education Spending Puzzle
Special education spending has grown faster than enrollment. Is this cost growth driven by more students, more services per student, or rising wages? The answer matters for policy.
Frequently Asked Questions
What is IDEA's unfunded mandate?
When IDEA passed in 1975, Congress promised to fund 40% of the excess cost of special education. They've never come close—actual federal funding hovers around 13-18%. The remaining 60-85% falls on state and local budgets, creating an unfunded mandate of roughly $25 billion annually. Read our full analysis in The Unfunded Mandate.
What is maintenance-of-effort (MOE)?
MOE is a federal requirement that school districts cannot reduce special education spending below prior-year levels. California strengthened this with an MOE "floor" in 2008. While this protects special education funding, our research shows that districts shifted cuts to general education instead.
Why do special education costs vary so much between districts?
Per-student special education spending varies more than 3-fold across California districts. Our research suggests this variation reflects service delivery choices more than differences in student needs. Some districts provide more intensive services, pay higher wages, or have different mixes of disabilities. Understanding these drivers is essential for policy. See The Special Education Spending Puzzle.
Did stimulus funding help or hurt schools?
Both. ARRA's $100+ billion for education prevented immediate layoffs and program cuts during the Great Recession. But when the funding expired, some districts faced a "fiscal cliff"—ending up worse off than if they had made gradual cuts from the start. Our article on the stimulus paradox examines this pattern.