One year ago, the U.S. Department of Education released its report finding that Texas artificially decreased participation in special education by imposing a “cap” on the percentage of students receiving services read our blog post about this issue here.  Now, the Fifth Circuit has upheld a U.S. Department of Education finding that Texas underfunded special education by $33.3 million dollars, permitting the Department to impose a dollar-for-dollar penalty on the state’s eligibility for grants. The “Maintenance of State Financial Support” clause of the Individuals with Disabilities Education Act prohibits states from reducing special education funding from year-to-year. If a state fails to spend at least as much as it did in the prior fiscal year, the U.S. Department of Education may withhold funding from the state on a dollar-for-dollar basis. States can obtain a waiver from this provision if they can prove that all students are receiving a FAPE, but Texas did not seek this relief.

Since 1995, Texas has used a “weighted student model” to allocate spending on special education and related services. Basically, this model calculates spending on an “as-needed” basis by allocating funds based on the actual needs as determined by each student’s IEP. Consequently, if fewer students are enrolled in special education, or if the students who are enrolled receive fewer services, total spending decreases. In the 2012 fiscal year, Texas spent over $377 million, or, by an alternative accounting method, $33.3 million less on special education and related services than it spent in 2011. The state attributed this reduction to improved student outcomes—students’ IEP’s called for fewer or less expensive services. Under the weighted model, this resulted in less spending per student, and less spending overall.

Interpreting the law strictly, the U.S. Department of Education issued a proposed determination that Texas was ineligible for $33.3 million in grants. Texas argued that its model was permitted under the IDEA. An Administrative Law Judge sided with the DOE, and the Secretary of Education declined to disturb the ALJ’s ruling. Texas appealed. The crux of Texas’s argument was that its model for calculating spending from year to year remained unchanged. While Texas admitted that this resulted in an overall decrease in the aggregate amount spent, Texas claimed it did not reduce the overall amount available—if more students required more services, more would be spent.

The Fifth Circuit disagreed, deciding that the plain language of the IDEA required Texas to spend the same amount or more on special education and related services from year-to-year, regardless of the model applied. Because Texas never appropriated the $33.3 million in funds, it never made these funds available, and spending fell short. The Court further found that Texas’s weighted-student model is not permitted under the statute if it results in lower per-student spending or lower spending overall.

As a result of the Court’s ruling, Texas will likely be ineligible for $33.3 million in future funding, and will be forced to change its funding model. This change could come in one of two ways. If the state chooses to maintain the weighted-student model, it will have to modify the model to supplement funding in the event of a shortfall caused by less expensive IEPs. Alternatively, Texas could simply adopt a model requiring funds to be allocated in an amount equal to or greater than the prior year, either on a total or per-student basis. As a result of the Court’s ruling, Special Education funding should be a priority in the upcoming legislative session.

 

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