Funding Reform for NC Students with Disabilities

The North Carolina General Assembly is actively working to enhance state funding and services for students with disabilities. Recognizing the critical need for reform, state education officials are conducting a thorough study to identify effective strategies for improving resources allocated to these students.

The 2023 state budget mandates the Department of Public Instruction (DPI) to recommend necessary changes to the state funding formula for special education. Currently, school districts receive a flat rate of $5,309 per student who qualifies for special education services. This model, while straightforward, has significant limitations. Notably, the funding is capped, meaning that many school districts and charter schools that exceed this cap do not receive additional resources, despite the growing demand for services.

According to a 2022 report by RTI International, commissioned by the General Assembly, a little over 13% of all North Carolina public school students receive special education services. This figure varies across districts, with some schools, such as Mitchell County Schools, seeing rates as high as 22% of students receiving these services. This discrepancy highlights the challenges faced by districts that have a higher concentration of students with disabilities.

Special education funding in North Carolina is capped at 13% of a school district or charter school’s total student population. Consequently, if more than 13% of students in a district require special education services, the school does not receive any special funding for those additional students. In response to these issues, state education officials have recommended eliminating this funding cap in a new report to the General Assembly.

Furthermore, the report suggests that state funds for students with disabilities—whether due to physical challenges, attention deficits, or learning differences—should be calculated based on the specific needs of each student. For instance, if a student requires a smaller classroom setting or the assistance of an individual aide, their school district would receive increased funding to accommodate those needs. The report proposes a classification system that categorizes students into four levels based on the intensity of their needs, allowing for weighted funding tailored to each level.

“We’re considering staffing as the biggest burden,” noted DPI’s Senior Director in the Office of School Business Services, Jennifer Bennett, during a recent State Board of Education meeting. Bennett clarified that the proposed funding model would not reimburse schools for particular expenses or dictate how they should allocate the funds. Instead, it aims to provide a more equitable distribution of state funding for special education, reflecting the actual services required rather than a flat per-student rate.

For these recommendations to be implemented, the General Assembly will need to pass a law. Historical efforts to modify North Carolina’s school funding model have often stalled without legislative action. However, Bennett expressed optimism, stating that lawmakers currently exhibit “the highest level of interest we’ve seen in 20 years.”

“And it’s of high interest from leadership with the legislature,” added State Superintendent Catherine Truitt.

Another crucial aspect of the state budget includes a provision that instructs the Department of Public Instruction to explore more effective ways to serve students with disabilities by considering placement in private schools. Federal law permits states to fund the transfer of students with disabilities from public to specialized private schools, but this policy remains underutilized in North Carolina when compared to states like New York, California, and New Jersey.

Stacey Gahagan, a special education attorney and partner at Gahagan Paradis law firm, represents families who argue that their local public schools lack the necessary resources to meet their child’s specific needs. She emphasizes that the current public school system often exhausts its options, leaving students without adequate support. “What we often see is that those services and access to education just ends up being cut for the students because [public schools] have run out of the tools in their toolbox,” Gahagan said. “What we want to be able to say is, like, ‘Here’s another option.’”

One viable alternative for families is to consider specialized private institutions, such as Melmark in Charlotte, which caters specifically to students with developmental disabilities, or the Hill Center in Durham, which focuses on students with learning differences and attention deficit disorders. However, Gahagan points out that many public schools in North Carolina currently lack a formal system for referring students to these specialized private schools. As a result, it is often only financially well-off families who seek out nonpublic special education services and later apply for federal reimbursements to cover tuition.

North Carolina does have a state program allowing public schools to utilize state funds to place students in specialized nonpublic schools. However, the availability of options remains limited, with only four private schools in the state formally approved by the DPI for this program, including Melmark and the Hill Center. Carol Ann Hudgens, DPI’s Senior Director of the Office of Exceptional Children, recently informed the State Board of Education that only about 139 students in North Carolina currently benefit from this program, representing less than 0.1% of all students with disabilities in the state’s public school system.