BILL ANALYSIS
AB 826
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Date of Hearing: April 29, 2009
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 826 (Buchanan) - As Introduced: February 26, 2009
SUBJECT : Special education: local plan areas: funding
SUMMARY : Makes changes, commencing in 2009-10, in calculations
made by the Superintendent of Public Instruction (SPI) related
to the treatment of property taxes and federal funds in
determining funding allocations for special education local plan
areas (SELPAs). Specifically, this bill :
1)Removes the total amount of property taxes for a SELPA from
the calculation of the base special education funding
entitlement for that SELPA.
2)Removes the total amount of federal funds allocated to a SELPA
from the calculation of the base special education funding
entitlement for that SELPA.
EXISTING LAW :
1)Establishes SELPAs as the entity responsible for distributing
state allocated special education funding to school districts
and for coordinating services to students with disabilities.
2)Provides support for special education through a combination
of federal and state funds.
3)Allocates state, federal and local funding to each SELPA based
on a historical rate per average daily attendance (ADA) which
was substantially equalized by 2001, the total ADA in the
SELPA, growth and cost of living adjustments (COLA),
additional adjustments for equalization, and a special
disabilities adjustment to offset the fact that pupils with
high cost/low incidence disabilities are not uniformly
distributed across SELPAs.
4)Prohibits, under federal law, states from using federal funds
to pay for any adjustment for COLA or growth that is required
by state law.
FISCAL EFFECT : Unknown
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COMMENTS : The disabilities that qualify a student for special
education vary widely, from a mild speech or learning disability
to conditions that require specialized, individual care that
goes well beyond classroom instruction. About half of students
enrolled in special education have a learning disability, and
another quarter have a speech or language impairment. These
conditions qualify a student for extra assistance but, in
general, have a moderate impact on the cost of education. Much
more dramatic are the costs of educating the other quarter of
students with more serious disabilities, including mental
retardation; visual, orthopedic, or other health impairments;
emotional disturbance; loss of hearing and/or sight; traumatic
brain injuries; or multiple disabilities.
Funds for special education services are distributed to
districts through SELPAs; in addition, SELPAs coordinate
services for students with disabilities from infancy to age 22.
The member districts of a SELPA agree on how the required
services will be provided and how to allocate funding to each
district based on the programs it operates and the students it
serves.
A SELPA may include several school districts or simply coincide
with a particular school district or county boundary. In rare
cases, a particularly large school district may have more than
one SELPA.
In the Supplemental Report to the 1994-95 Budget Act, the
Legislature directed the California Department of Education, the
Legislative Analyst's Office and the Department of Finance
collaborate to address some of the concerns with the special
education funding model; specifically they were instructed to
review special education finance laws and propose a new system
that would be more fair, flexible, and less complex. Over the
next year and a half the agencies held discussions; this
resulted in a series of recommendations submitted in a draft
report, issued in spring 1995, and a final report submitted
later that year. Many of the recommendations contained in the
reports were incorporated into AB 602 (Davis), Chapter 854,
Statutes of 1997, which changed California's special education
funding from a resource-based to a census-based approach, which
allocates funds according to the total ADA in the school
districts within a SELPA, rather than on the number of
identified special education students. The intent behind this
change was to provide comparable special education funding to
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SELPAs with comparable enrollment; under this ADA-based
approach, two SELPAs with the same overall average daily
attendance are generally treated the same for funding purposes.
The state provides a minimum basic special education allocation
based on each SELPA's per- ADA funding rate that was
historically established. Over time these per-ADA rates have
been substantially equalized. The funding model also includes
provision for making adjustments for growth and COLA, in
addition to equalization. Tying funding for students with
disabilities to a SELPA's total ADA was partly based on the
assumption that students with disabilities are roughly uniformly
distributed across districts and SELPAs. This assumption
generally holds, except in the case of certain high cost/low
incidence disabilities; the funding model accounts for this by
providing an adjustment for SELPAs based on the number of
students with these disabilities.
Special education is funded with a combination of state, federal
and local funds. The state and federal governments together
provided approximately $4.3 billion in the 2007-08 fiscal year
for special education. This funding, which goes first to the
SELPA and then is distributed out to districts, does not cover
the full cost of educating students with disabilities. Local
school districts are expected to provide a share from property
tax and other revenues, including the base revenue limit funding
that districts receive for students with disabilities in the
same way as for all other students. The primary funding problem
facing special education stems from shortfall in funding
provided by the federal government relative to the commitment
that was historically made. In the initial authorization of the
Individuals with Disabilities Education Act (IDEA) Congress
recognized the mandates that were being imposed on states and
local educational agencies (LEAs), and stated a goal that the
federal government would provide forty percent of the funding
necessary to meet these mandates. Estimates of the federal
contribution to special education funding in recent years have
ranged from thirteen to twenty-five percent - clearly short of
the forty percent commitment. The burden for making up this
shortfall has fallen on the states and LEAs which must comply
with the mandates. This situation has been exacerbated by rapid
growth in the number of students with disabilities, particularly
those with higher cost disabilities such as autism.
This federal funding shortfall, and more specifically the
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slowdown in federal grant increases for special education
through the middle part of this decade, has also led to changes
with respect to funding the special education COLA. From
2002-03 through 2004-05, increases in the federal grant were
used to fund COLA and growth on the full special education
funding entitlement; however, this resulted in a change in
federal law that prohibited states from using federal funds to
pay for any adjustment for COLA or growth that is required by
state law. Subsequent to that change, budget actions have been
taken to provide funding for COLA and growth on the state and
local portion of the special education allocations using state
funds, and to provide for COLA and growth on the federal portion
using increases in the federal grant. Thus in years when the
federal government does not provide sufficient special education
funds to cover COLA and growth, those adjustments are not fully
provided for federal funds.
It is hoped that the $1.2 billion infusion of federal funds for
IDEA that is being provided to California as part of the
American Recovery and Reinvestment Act (ARRA) over the next two
years will begin to make good on the federal commitment.
However, at this time these funds are not permanent; additional
Congressional action would be necessary to make these funds
ongoing, and thus relieve some of the funding pressure placed on
the state and LEAs. Committee staff recommends that the
Committee and the Legislature continue past efforts to request
that Congress provide sufficient ongoing funding for special
education.
A SELPA's total funding allocation, in much simplified terms, is
equal to the sum of:
1)Base state aid that is calculated by multiplying the SELPA's
per-ADA rate times total ADA in the SELPA, and then
subtracting property tax proceeds to the SELPA and the SELPA's
federal allocation. This calculation is analogous to that
made for district revenue limit funding, where non-state funds
are used toward the entitlement and state funds then provide
the balance.
2)Any supplement to base funding related to increases in federal
aid.
3)Any COLA adjustment to the per-ADA funding rate, which is then
multiplied by total ADA in the SELPA.
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4)Any funding for growth based on growth in ADA in the SELPA.
5)Additional funding for the Special Disabilities Adjustment.
6)State funds provided for other specialized programs within
special education.
7)Property tax proceeds to the SELPA.
8)Federal funds allocated to the SELPA.
This bill proposes to make changes in the calculations completed
in step 1) of the process above. According to the author,
"Assembly Bill 826 would simplify the current special education
funding model (AB 602 of 1997) by removing the federal special
education dollars (IDEA Part B) from the AB 602 calculation.
This is a technical adjustment and is revenue neutral.
California's current special education funding formula has been
complicated by including the federal dollars into the
calculation. Since 1980, federal special education funds have
been deducted from state special education entitlement funds
allocated to Special Education Local Plan Areas (SELPAs). The
result of this practice has added an unnecessary complexity in
allocating federal IDEA funds to SELPAs and school agencies."
The bill also proposes, in the same way, to eliminate the
current treatment of property taxes in step 1) above.
The author argues that this proposal constitutes a technical
adjustment to the model that is revenue neutral and provides for
simplification of the AB 602 funding model, since it is designed
to pull federal funding and property taxes out of the
calculations for determining a SELPA's base funding allocation.
However, in a funding system that is as complex as that used for
special education, even technical fixes can create consequences
that are far reaching in terms of total funding and the
distribution of funding across SELPAs. Because of this, there
are a number of questions that should be answered in order for
the Committee to completely evaluate the effects of this bill:
1)Does the removal of local property taxes accruing to SELPAs
from the calculation of the base state aid to be provided to a
SELPA create a fiscal impact or the potential for cost
pressure on the state?
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2)Is there a potential for distributional impacts, especially if
there are future changes in the distribution of property taxes
or federal funds, and would those impacts violate the primary
intent of AB 602 - to provide funding equity across SELPAs?
3)Are there potential out-year implications with respect to
equalization in that the remaining entitlements to state aid
will be perceived to be widely variable?
4)If any SELPA receives an increase in property tax proceeds or
federal funds relative to other SELPAs, will there be any
impact on the state aid entitlement, or will that SELPA simply
be better off relative to others?
5)How does this proposal impact the calculation of growth and
COLA adjustments across SELPAs' entitlements, and how would
growth and COLA be applied to federal funds?
6)Are there any unintended consequences that we might foresee
from making changes in a system as complex as this?
7)Since enacting any fiscal or administrative system change in
the middle of a fiscal year is always a problem, is there any
benefit that accrues to special education students from
implementing this change on January 1, 2010; if there is such
benefit, does it outweigh the costs, in terms of disruption or
errors in the allocation of funding, that are incurred by
making a mid-fiscal year change?
8)This bill proposes to change components that have been part of
the calculation of special education entitlements since 1980,
when the previous funding model created by the California
Master Plan for Special Education was implemented, have there
been changes in other policy or in special education funding
that have brought this change to some level of urgency?
9)How is this proposal integrated with other bills passed by
this Committee that could lead to changes in the overall
funding system, including how funding for special education is
determined?
The process that led to the implementation of the current AB 602
model started with budget discussions during the 1993-94
Legislative session and before. These discussions led to the
Supplemental Report action in the 1994-95 Budget Act, the work
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of the CDE, LAO, and DOF over the next year and a half, the
issuance of their final report in December 1995, and the passage
of AB 602 in 1997 which phased-in the new model over the next
two years and called for additional study by CDE, LAO and DOF.
This process was so inclusive and studied that very few changes
have been made to the AB 602 funding model in the twelve years
since the bill was enacted. In addition, the discussion and
planning that went into AB 602 still left two issues about which
the Legislature had questions; in both of these cases, the issue
of the incidence of high cost disabilities with respect to the
Special Disabilities Adjustment and issues surrounding nonpublic
schools or agencies, the Legislature directed that an outside
research entity be commissioned to study the issue and make
recommendations. More recently in 2001, the Legislature
directed the CDE to commission an outside research entity to
study an aspect of the funding model that was providing an
incentive to place children with disabilities who resided in
group home settings in nonpublic schools to receive their
educational services; the research firm analyzed the issue, and
provided recommendations that led to statutory changes in that
component of the special education funding model. It is clear
that the Legislature has been very deliberative when considering
changes to the special education funding model. The proposal
made in this bill calls for changes in this long standing model
to be made commencing in the 2009-10 fiscal year, without the
benefit of further study.
Committee staff recommendation: Due to the questions remaining
above, Committee staff recommends that the Committee hold this
bill as a two-year bill to be heard in January. Staff also
recommends that the Chair and the author jointly request the
CDE, LAO, and DOF to again collaborate to address some of the
concerns with the special education funding model brought up by
the author. In particular this collaborative group should
examine and analyze the specific proposals made in this bill
with respect to the questions raised in this analysis and any
other potential consequences, and report their findings and any
recommendations back to the Chair and the author. These efforts
should provide for more deliberative actions by the Committee
and the Legislature in January.
Previous legislation:
AB 1115 (Strom-Martin), Chapter 78, Statutes of 1999, makes a
change to the current formula for calculating the special
education COLA, so that differences in funding due to different
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incidence rates for specific high-cost disabilities are
considered in the COLA calculation. SB1468 (Rosenthal), Chapter
846, Statutes of 1998, revises the calculation of special
education funding to account for the new definition of ADA that
excludes excused absences for ADA calculations. AB 598 (Davis),
Chapter 89, Statutes of 1998, makes numerous technical and
conforming amendments to existing provisions of law to implement
the revision and equalization of special education funding
formulas that was enacted by AB 602. AB 602 (Davis), Chapter
854, Statutes of 1997, implements a new special education
funding system and provides a one-time equity adjustment for the
1997-98 fiscal year.
REGISTERED SUPPORT / OPPOSITION :
Support
Association of California School Administrators
California State PTA
California Association of School Business Officials
California Association of School Psychologists
Coalition for Adequate Funding for Special Education
Cutler-Orosi Joint Unified School District
El Dorado County SELPA
El Dorado County Charter SELPA
Exeter Public Schools
Farmersville Unified School District
Fillmore Unified School District
Fremont Unified School District
Kern County Superintendent of Schools
Las Virgenes Unified School District
Moreno Valley Unified School District
Nevada County SELPA
North Inland Special Education Region
Riverside County SELPA
San Joaquin County Office of Education
Santa Clara County Office of Education
Santa Cruz City Schools
San Ramon Valley Unified School District
Sierra Sands Unified School District
South Orange County SELPA
SELPA Administrators
Three Rivers Union School District
Tulare County/District SELPA
Vallejo City Unified School District
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Vallejo SELPA
Visalia Unified School District
West Contra Costa Unified School District
West End SELPA
West San Gabriel Valley SELPA
Opposition
None on file
Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087