SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

AB 428 (Medina) - Special education funding

Bill Summary:

This bill requires special education funding rates to be equalized to the 95th percentile after the Local Control Funding Formula (LCFF) is fully funded and makes other various special education funding changes.

Fiscal Impact:

The California Department of Education (CDE) estimates this bill would result in ongoing Proposition General Fund costs of about $1.1 billion as follows:

• $319 million to equalize special education funding rates to the 95th percentile.
• $788 million to fund special education in preschool.
• $25 million to provide supplemental funding for students with severe or low incidence disabilities.

Staff notes that the proposed budget includes $152.6 million to ensure that all SELPAs receive at least the statewide target rate under the existing AB 602 formula, and an additional $493.2 million for early intervention preschool grant funding.

This bill could also result in a new reimbursable state mandate in the low millions of dollars to account for how SELPAs and their member school districts would calculate declining enrollment.

Background:

The state has funded SELPAs based on their overall student attendance, regardless of how many students they serve in special education, the specific disabilities of those students, or what types of services those students receive. This census-based approach was intended to eliminate the complexity and perverse incentives of the former J-50 system.

When the AB 602 system was first introduced, the state set each SELPA’s per-student funding rate equal to its total funding in the last year under the J-50 system divided by its total student population in that year. Because funding rates varied notably under the J-50 system, the new rates established under AB 602 also varied. The state established a statewide target rate equal to the average special education per-student funding rate and allocated funding in the late 1990s and early 2000s to bring SELPAs below the statewide target rate up to the target. However, the state has provided no additional funding to equalize per-student rates since 2000-01.

Although funding rates remain unequal, AB 602 has largely realized the state’s original goals of simplifying funding and encouraging instructional innovation. Regarding simplicity, schools no longer complete complicated paperwork based on intricate formulas before they receive state funding. Regarding innovation, the proportion of students with severe disabilities being served in mainstream settings has doubled since the late 1990’s (from 15 to 30 percent).

State law defines students who are deaf, hard of hearing, visually impaired, or orthopedically impaired as having “low-incidence” disabilities. Students with these disabilities typically account for roughly 0.5 percent of all K-12 students. Students with low-incidence disabilities often require relatively expensive support. To help SELPAs cover the higher costs of serving these students, the state has allocated some funding based on the number of students with low-incidence disabilities since 1985-86. These funds can be spent on either materials or services for these students.

State and federal law require LEAs to provide services for preschool-age students with exceptional needs. Dedicated support for costs of providing special education services for preschool age students comes from federal and local funds, but funding is not specifically provided for these students through AB 602.

Proposed Law:

This bill requires that, in the first fiscal year following the full funding of the LCFF, the SPI compute an equalization adjustment for each Special Education Local Plan Areas (SELPA), and sets the target equalization rate at 95th percentile of statewide funding rates. The bill states the intent of the Legislature that the requirements of the act be implemented over the course of five years.

This bill specifies the method for calculating this equalization adjustment, and requires the SPI, in each year following an equalization adjustment, to perform computations to determine the statewide target amount per unit of ADA in order to determine the inflation adjustment and growth adjustment, as specified.

This bill establishes a funding mechanism for providing funding for preschool-age students in the AB 602 formula, by requiring that, for the purpose of providing funding for preschool-aged children with special needs, commencing with the first fiscal year after the full funding of LCFF, a SELPA that reports serving children three or four years of age who meet the definition in Section 56026, except for a special education local plan area that, as of December 1, 2018, reported exclusively serving children three or four years of age in transitional kindergarten or kindergarten, for purposes of calculating units of ADA, the SELPA count three times all units of ADA generated by children enrolled in kindergarten, less those children eligible for transitional kindergarten. The bill provides that any growth in ADA generated by the preschool adjustment be funded at the prevailing statewide target rate.

This bill establishes a high cost service allowance for the purpose of providing supplemental funding to a SELPA on the basis of the number of pupils with severe disabilities, defined as autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, severe intellectual disability, both deafness and blindness, traumatic brain injury, and multiple disabilities. For the 2019-20 fiscal year, the bill requires the SPI to make the specified computations to determine the high cost service allowance for each SELPA. For the 2020-21 fiscal year and each fiscal year thereafter, the bill requires the SPI to make the same adjustment as required for the prior year, using a pupil count from December of the prior year of students who have a severe disability, as defined above.

This bill changes the definition of ADA for the purpose of calculating growth funding, to mean the total number of units of ADA of the districts or county offices which make up the SELPA, for the current or prior school year, whichever is greater, thereby allowing declining enrollment adjustments to be made on the basis of changes in district, rather than SELPA enrollment.

Related Legislation:

AB 3136 (O’Donnell, 2018), similar to this measure, would have required that special education funding rates be equalized to the 95^th percentile after the LCFF was fully funded, created a funding mechanism for state support of special education preschool, established a high cost service allowance to provide supplemental funding on the basis of the number of students with severe disabilities, and changed the calculation of the declining enrollment adjustment that it is based on school district, rather than Special Education Local Plan Area (SELPA), enrollment. The bill failed passage in this Committee.

Staff Comments:

Special education is funded through a combination of state, federal and local resources which totaled approximately $13.2 billion in 2015-16. Typically about 30 percent of SPED funding comes from state funds each year. Of these state funds, approximately 85 percent are categorical funds known as “AB 602” funding and are provided to SELPAs using a census-based method that allocates the funds based on the total number of students attending the schools within those specific areas, not the total number of students with disabilities. AB 602 was based on the assumption that students with disabilities are equally distributed throughout the student population and that providing funding based on overall enrollment would remove fiscal incentives for over identifying students with disabilities.

AB 602 funding rates vary widely across SELPAs,ranging from $480 to $925 per unit of ADA. These inequities reflect the state’s previous funding system for special education which based the funding levels in part on a survey of special education expenditures in 1979-80.

This bill requires that special education funding rates be equalized to the 95th percentile after the LCFF is fully funded (the proposed 2019-20 budget includes full funding for the LCFF). This bill also proposes a new high-cost allowance to provide supplemental funding to SELPAs for students with severe disabilities such as autism, blindness, deafness and serious emotional disturbances, which are significantly more expensive. The allowance would be equal to the average base rate, which is about $533. Further, this bill proposes funding for preschool students by adding an estimate of preschool ADA to the AB 602 funding formula and changes the calculation of the declining enrollment adjustment that it is based on school district, rather than SELPA, enrollment.

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SENATE COMMITTEE ON EDUCATION

Senator Connie Leyva, Chair

2019 - 2020 Regular

Bill No: AB 428 Hearing Date: June 12, 2019

Subject: Special education funding.

SUMMARY

This bill requires that special education funding rates to be equalized to the 95th percentile after the Local Control Funding Formula (LCFF) is fully funded and makes other various special education funding changes.

BACKGROUND

Existing law:

1. Establishes, commencing with the 1998-99 fiscal year, a “census based” funding system for the allocation of state special education funds, providing most funding appropriated for support of special education programs on the basis of the average daily attendance (ADA) of special education students enrolled in the prior year, multiplied by a funding rate unique to each Special Education Local Plan Areas (SELPA).
2. Establishes a calculation for determining a statewide target rate of funding used for the purpose of calculating the funding rate of ADA growth in each SELPA.
3. Requires, in specified fiscal years, equalization adjustments to be made to increase the funding rates of SELPAs with rates below the 90^th percentile.
4. Establishes an extraordinary cost pool for the extraordinary costs associated with single placements in nonpublic, nonsectarian schools.
5. Establishes a low incidence disability fund for costs associated with the education of students who are visually impaired, hearing impaired, and severely orthopedically impaired, and any combination thereof.
6. Requires, through state and federal law, that children with exceptional needs between the ages of three and five be provided with a free and appropriate education.

ANALYSIS

This bill:

1. States the intent of the Legislature that the requirements of the act be implemented over the course of five years.
2. Requires that, in the first fiscal year following the full funding of the Local Control Funding Formula (LCFF), the Superintendent of Public Instruction (SPI) compute an equalization adjustment for each Special Education Local Plan Areas (SELPA), and sets the target equalization rate at 95th percentile of statewide funding rates.
3. Specifies the method for calculating this equalization adjustment as follows:
   1. Multiply the amount computed for each SELPA by the average daily attendance (ADA) used to calculate its funding for the year in which an appropriation is made for equalization.
   2. Divide the amount appropriated for purposes an equalization adjustment by the statewide sum of the amount computed above.
   3. Multiply the amount computed for the SELPA by the amount computed above.
4. Requires the SPI, in each year following an equalization adjustment, to perform the following computations to determine the statewide target amount per unit of ADA in order to determine the inflation adjustment and growth adjustment:
   1. Total the amount of funding computed for each SELPA.
   2. Total the number of units of ADA reported for each SELPA for the fiscal year preceding the equalization appropriation.
   3. Divide the total funding by the total ADA .
5. Establishes a funding mechanism for providing funding for preschool-age students in the AB 602 formula, by requiring that, for the purpose of providing funding for preschool-aged children with special needs, commencing with the first fiscal year after the full funding of LCFF, a SELPA that reports serving children three or four years of age who meet the definition in Section 56026, except for a special education local plan area that, as of December 1, 2018, reported exclusively serving children three or four years of age in transitional kindergarten or kindergarten, for purposes of calculating units of ADA, the SELPA count three times all units of ADA generated by children enrolled in kindergarten, less those children eligible for transitional kindergarten.
6. Requires that any growth in ADA generated by the preschool adjustment be funded at the prevailing statewide target rate.
7. Establishes a high cost service allowance for the purpose of providing supplemental funding to a SELPA on the basis of the number of pupils with severe disabilities, defined as autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, severe intellectual disability, both deafness and blindness, traumatic brain injury, and multiple disabilities.
8. For the 2019-20 fiscal year, requires the Superintendent of Public Instruction (SPI) to make the following computations to determine the high cost service allowance for each SELPA:
   1. From the December 2018 pupil count, the number of pupils who have a severe disability, defined as: autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, severe intellectual disability, and those individuals who would have been eligible for enrollment in a development center for handicapped pupils, plus both deafness and blindness, traumatic brain injury, or multiple disabilities.
   2. Multiply this amount by the statewide target amount per unit of average daily attendance (ADA) for the 2019–20 fiscal year.
9. Requires the SPI, for the 2020-21 fiscal year and each fiscal year thereafter, to make the same adjustment as required for the prior year, using a pupil count from December of the prior year of students who have a severe disability, as defined above.
10. Changes the definition of ADA for the purpose of calculating growth funding, to mean the total number of units of ADA of the districts or county offices which make up the SELPA, for the current or prior school year, whichever is greater, thereby allowing declining enrollment adjustments to be made on the basis of changes in district, rather than SELPA enrollment.

STAFF COMMENTS

1. Need for the bill. According to the author, “For decades the state has underinvested in its special education system, allowing unequal rates to disadvantaged students in some regions for no reason, providing disincentives to invest early in the education of our students - when the return is greatest - and failing to provide additional resources to support students who require a higher level of service to succeed.

Multiple reports over the years have argued for targeted investments to fix our special education finance system and better support our special education students. One such report, the 2015 report of the California Special Education Task Force (convened by the State Board of Education, the Superintendent of Public Instruction, and the Commission on Teacher Credentialing) set out a goal of one coherent system that serves all students, with a vision that special education students would be viewed as general education students first. The Task Force report acknowledged the significant special education fiscal challenges faced by schools and recommended a number of steps to improve the system and student outcomes. This bill addresses several of their recommendations.

AB 428 would equalize base AB 602 funding rates to the 95^th percentile, establish a funding formula within AB 602 for programs serving preschoolers with disabilities, create a high cost service allowance to provide additional funding for students with significant high-cost disabilities, allow school districts to calculate a declining enrollment adjustment based on individual school district average daily attendance (ADA) instead of aggregated Special Education Local Plan Areas (SELPA) ADA.

In these ways AB 428 would remedy several long standing deficiencies in our special education finance system, providing resources to help our students with disabilities reach their full potential.”

1. Special education funding history. In 1975, California developed its Master Plan for Special Education, which expanded the types of services schools were required to provide students with disabilities. In that same year, Congress passed the Individuals with Disabilities Education Act. The Master Plan also required all districts to join Special Education Local Plan Areas responsible for coordinating special education among its member districts. Lastly, the Master Plan introduced a simplified funding system (J-50 system) based on the following three types of special education services: (1) special day classes attended only by students with disabilities, (2) resource specialists providing pull-out instructional support, and (3) designated instruction and services supplementing general instruction.

Under the J-50 funding system, schools received one rate for each special day class they operated, another rate for each resource specialist, and another for each employee providing designated instruction and services. Each Special Education Local Plan Areas (SELPA’s) rates were set based on a statewide survey of special education costs in 1979-80, which no longer reflected the full range of services offered by the mid-1990s. In response, the state adopted a new special education system based on overall attendance (AB 602 system) which is still used today.

1. Current special education funding system. Since 1998, the state has funded SELPAs based on their overall student attendance, regardless of how many students they serve in special education, the specific disabilities of those students, or what types of services those students receive. This census-based approach was intended to eliminate the complexity and perverse incentives of the former J-50 system.

When the AB 602 system was first introduced, the state set each SELPA’s per-student funding rate equal to its total funding in the last year under the J-50 system divided by its total student population in that year. Because funding rates varied notably under the J-50 system, the new rates established under AB 602 also varied notably. The state established a statewide target rate equal to the average special education per-student funding rate and allocated funding in the late 1990s and early 2000s to bring SELPAs below the statewide target rate up to the target. However, the state has provided no additional funding to equalize per-student rates since 2000-01.

Although funding rates remain unequal, AB 602 has largely realized the state’s original goals of simplifying funding and encouraging instructional innovation. Regarding simplicity, schools no longer complete complicated paperwork based on intricate formulas before they receive state funding. Regarding innovation, the proportion of students with severe disabilities being served in mainstream settings has doubled since the late 1990’s (from 15 to 30 percent).

1. Low incidence disabilities. State law defines students who are deaf, hard of hearing, visually impaired, or orthopedically impaired as having “low-incidence” disabilities. Students with these disabilities typically account for roughly 0.5 percent of all K-12 students. Students with low-incidence disabilities often require relatively expensive support. To help Special Education Local Plan Areas (SELPAs) cover the higher costs of serving these students, the state has allocated some funding based on the number of students with low-incidence disabilities since 1985-86. These funds can be spent on either materials or services for these students.

This bill proposes a new high cost service allowance for the purpose of providing supplemental funding to SELPAs based on the number of pupils with severe disabilities, defined as autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, severe intellectual disability, both deafness and blindness, traumatic brain injury, and multiple disabilities. The allowance would be equal to the average base rate, which is about $533.

1. Special education preschool funding. State and federal law require local educational agencies (LEAs) to provide services for preschool-age students with exceptional needs. Dedicated support for costs of providing special education services for preschool age students comes from federal and local funds, but funding is not specifically provided for these students through AB 602. According to the author, LEAs spent approximately $500 million in 2014-15 for special education preschool services.
2. Declining enrollment adjustment. Under current law, special education funding is based on the greater of current or prior year average daily attendance (ADA) at the SELPA-level. To calculate ADA at the SELPA level, ADA from all districts within a SELPA is combined. Critics of this approach argue that combing the ADA of each district within a SELPA, then applying the greater of current or prior year, masks the declining enrollment of certain districts within a SELPA if other districts within the SELPA are growing.

This bill specifies that each district shall first take the greater of current or prior year ADA, then combine the ADA of each district within a SELPA. The effect of this provision could be that when students transfer districts within the same SELPA, the SELPA would be double-funded for the transferring students even though the SELPA would not be serving any more students.

1. Prior Legislation.

AB 3136 (O’Donnell, 2018) would have required that special education funding rates be equalized to the 95^th percentile after Local Control Funding Formula was fully funded, created a funding mechanism for state support of special education preschool, established a high cost service allowance to provide supplemental funding on the basis of the number of students with severe disabilities, and changed the calculation of the declining enrollment adjustment that it is based on school district, rather than Special Education Local Plan Area (SELPA), enrollment. The bill died in the Senate Appropriations Committee.

SUPPORT

Coalition For Adequate Funding for Special Education (sponsor)

Alameda County Office of Education
Albany Unified School District
Albany Unified School District Board of Education
Alhambra Unified School District SELPA
Alisal Union School District
Alta Loma School District
Anaheim Union High School District
Antelope Elementary School District
Antelope Valley SELPA
Association of California School Administrators
Atascadero Unified School District
Bellevue Union School District
Benicia Unified School District
Bonsall Unified School District
Brentwood Union School District
Briggs Elementary School District
Burbank Unified School District
Calaveras County Office of Education
Calaveras County SELPA
California Alliance of Child and Family Services
California Association of Private Special Education Schools
California Association of School Business Officials
California Association of School Psychologists
California Association of Suburban School Districts
California Charter Schools Association
California Down Syndrome Advocacy Coalition
California Federation of Teachers
California Retired Teachers Association
California School Boards Association
California School Employees Association
California School Funding Coalition
California State PTA
California Teachers Association
Cal-TASH
Cardiff School District
Carlsbad Unified School District
Carmel Unified School District
Castaic Union School District
Cayucos Elementary School District
Central Unified School District
Central Valley Education Coalition
Centralia School District
Chino Valley Unified School District
Claremont Unified School District
Clovis Unified School District
Columbia Elementary School District
Compton Unified School District
Conejo Valley Unified School District
Contra Costa SELPA
Core at the Camptonville Academy
Cotati-Rohnert Park Unified School District
Covina-Valley Unified School District
Cypress School District
Del Mar Union School District
Dinuba Unified School District
Dixon Unified School District
East San Gabriel Valley SELPA
East Valley SELPA
El Dorado Charter SELPA
El Dorado County SELPA
El Dorado County Superintendent of Schools
El Segundo Unified School District
Elk Grove Unified School District
Encinitas Union School District
Escondido Union High School District
Escondido Union School District
Etiwanda School District
Evergreen Union School District
Fairfield-Suisun Unified School District
Firebaugh-Las Deltas Unified School District
Folsom Cordova Unified School District
Fontana Unified School District
Foothill SELPA
Foothill SELPA Community Advisory Council
Fresno County Charter SELPA
Fresno County SELPA
Fresno County Superintendent of Schools
Fresno Unified School District
Garden Grove Unified School District
Glendale Unified School District
Glendora Unified School District
Golden Valley Unified School District
Greater Anaheim SELPA
Grossmont Union High School District
Gustine Unified School District
Hawthorne School District
Hope School District
Horicon Elementary School District
Hueneme Elementary School District
Irvine Unified School District
Kern County Superintendent of Schools
KIPP Bay Area Public Schools
La Canada Unified School District
Lawndale Elementary School District
Loomis Union School District
Los Angeles County Office of Education
Lucia Mar Unified School District
Madera Unified School District
Magnolia ESD
Martinez Unified School District Office
Mendocino County SELPA
Merced City School District
Merced County Office of Education
Merced County SELPA
Merced River School District
Merced Union High School District
Mid-Alameda County SELPA
Milpitas Unified School District
Mono County Office of Education
Monterey County Office of Education
Monterey County SELPA
Mountain Union Elementary School District
Mt. Diablo Community Advisory Committee for Special Education
NCCSE Community Advisory Committee
Newhall School District
North Coastal Consortium for Special Education
North Inland SELPA
North Orange County Special Education Learning Plan Area
North Region Special Education Plan Area
North Valley School
Northeast Orange County SELPA
Oak Park Unified School District
Oak Run Elementary School District
Ocean View School District
Riverside County Office of Education
Ojai Unified School District
Orange County Department Of Education
Orange Unified School District
Orange Unified School District Special Education Department
Palos Verdes Peninsula Unified School District
Piner-Olivet Union School District
Placer County Office Of Education
Pleasant Valley School District
Rancho Santa Fe School District
Red Bluff Joint Union High School District
Red Bluff Union Elementary School District
Redondo Beach Unified School District
Reeds Creek Elementary School District
Riverside County Public K-12 School District Superintendents
Riverside Unified School District
Rocklin Unified School District
Rocky Point Charter School
Roseville City School District
Sacramento City Unified School District
San Bernardino County District Advocates for Better Schools
San Diego County Office of Education
San Diego South County SELPA
San Francisco Unified School District Advisory Committee For Special Education
San Gabriel Unified School District
San Joaquin County Office of Education
San Luis Coastal Unified School District
San Luis Obispo County SELPA District
San Marcos Unified School District
San Marino Unified School District
San Mateo County SELPA
San Pasqual Union School District
San Ysidro School District
Sanger Unified School District
Santa Barbara County SELPA
Santa Barbara Unified School District
Santa Clarita Valley SELPA
Santa Rosa City Schools
Savanna School District
Sebastopol Independent Charter
Selma Unified School District
SELPA Administrators Of California
Solana Beach School District
Solano County Office of Education
Solano County SELPA
Sonoma County Charter SELPA
Sonoma County SELPA
South Bay IEP & Disability Parents
South Bay Union School District
Southwest SELPA
Stockton Unified School District
Sulphur Springs Union School District
Sulphur Springs Unified School District
Sutter County SELPA
Sutter Union High School
Sweetwater Union High School District
Tehama County Department of Education
Tehama County SELPA
Torrance Unified School District
Travis Unified School District
Tri-City SELPA
Tuolumne County Superintendent of Schools
Tustin Unified School District
Tustin Unified School District SELPA
Twin Rivers Unified School District
Vacaville Unified School District
Valley Center-Pauma Unified School District
Ventura County Office of Education
Ventura County SELPA
Ventura Unified School District
Westside Elementary School District
West Contra Costa Unified School District SELPA
West Covina Unified School District
Wheatland Union High School District
William S. Hart Union High School District
Wright Elementary School District
Yuba County SELPA

OPPOSITION

An individual

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ASSEMBLY THIRD READING

ATR Bill Id:AB 428

Author:(Medina, et al.)

As Introduced Ver:February 7, 2019

Majority vote

SUMMARY:

Requires that special education funding rates be equalized to the 95^th percentile, creates a funding mechanism for state support of special education preschool, establishes a high cost service allowance to provide supplemental funding on the basis of the number of students with severe disabilities, and changes the calculation of the declining enrollment adjustment that it is based on school district, rather than Special Education Local Plan Area (SELPA), enrollment.

Major Provisions

1. Requires that special education funding rates be equalized to the 95^th percentile after the Local Control Funding Formula (LCFF) is fully funded.
2. Adds preschool age children to the state special education funding formula, so that state funding is provided to address the costs of serving preschool-age children.
3. Establishes a high cost service allowance to provide supplemental funding to SELPAs on the basis of the number of students with severe disabilities.
4. Changes the calculation of the SELPA declining enrollment adjustment so that it is based on school district, not overall SELPA, enrollment.

COMMENTS:

Recommendations for equalization of special education funding rates. Over many years policy reports have recommended that the state equalize special education funding rates. Some of the recent recommendations for equalization include:

1. For several years the Legislative Analyst's Office (LAO) has recommended that the state equalize special education funding rates to the 90^th percentile.
2. In 2015 the Statewide Special Education Task Force recommended that all SELPAs be funded at a new statewide target rate (90% of the current statewide average).
3. In 2016, the Public Policy Institute of California recommended that the state equalize to the 90^th percentile.

According to the Author:

"For decades the state has underinvested in its special education system, allowing unequal rates to disadvantage students in some regions for no reason, providing disincentives to invest early in the education of our students - when the return is greatest - and failing to provide additional resources to support students who require a higher level of service to succeed.

Multiple reports over the years have argued for targeted investments to fix our special education finance system and better support our special education students. One such report, the 2015 report of the California Special Education Task Force (convened by the State Board of Education, the Superintendent of Public Instruction, and the Commission on Teacher Credentialing) acknowledged the significant special education fiscal challenges faced by schools and recommended a number of steps to i­­mprove the system and student outcomes. This bill addresses several of their recommendations.

AB 428 would equalize base AB 602 funding rates to the 95^th percentile, establish a funding formula within AB 602 for programs serving preschoolers with disabilities, create a high cost service allowance to provide additional funding for students with significant high-cost disabilities, allow school districts to calculate a declining enrollment adjustment based on individual school district ADA (ADA) instead of aggregated SELPA ADA.

In these ways AB 428 would remedy several long standing deficiencies in our special education finance system, providing resources to help our students with disabilities reach their full potential."

Arguments in Support:

The Coalition for Adequate Funding for Special Education writes, "All school agencies grapple with increasing mandated Special Education expenditures and decreasing state and federal funding. We believe the changes proposed in AB 428 would assist every school agency to help us meet the educational needs of our students with disabilities."

Arguments in Opposition:

The Community Advisory Committee Leadership Collaborative writes, "Recently, we have conveyed our concerns to legislators and policy makers regarding AB 428 due to the ongoing lack of transparency and accountability over Special Education Local Plan Areas (SELPAs), leading to continually disparaging outcomes for students with disabilities."

FISCAL COMMENTS:

According to the Assembly Appropriations Committee:

1. Ongoing Proposition 98 General Fund (GF) costs of about $800 million to equalize special education funding rates to the 95^th percentile. (If this bill were to be implemented in equal increments over a five-year period, annual increases of about $160 million.)
2. Ongoing Proposition 98 GF costs of about $520 million to fund special education in preschool. (If this bill were to be implemented in equal increments over a five-year period, annual increases of about $100 million.)
3. Ongoing Proposition 98 GF costs of about $110 million to provide supplemental funding for students with severe disabilities. (If this bill were to be implemented in equal increments over a five-year period, annual increases of about $22 million.)
4. Ongoing Proposition 98 GF costs, potentially in the low millions to tens of millions of dollars, to provide funding to adjust how SELPAs and member school districts calculate declining enrollment. (If this bill were to be implemented in equal increments over a five-year period, annual increases of a few million dollars.) The state would need to reimburse SELPAs and school districts for the costs of adjusting the calculation of declining enrollment, if the Commission on State Mandates determines the bill's requirements to be a reimbursable state mandate.

VOTES:

ASM EDUCATION: 6-0-0

YES: O'Donnell, Kiley, Kalra, McCarty, Smith, Weber

ASM APPROPRIATIONS: 18-0-0

YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

UPDATED:

VERSION: February 7, 2019

CONSULTANT: Tanya Lieberman / ED. / (916) 319-2087 FN: 0000728

Date of Hearing: April 3, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 428

Author:(Medina, et al.) – As Introduced Ver:February 7, 2019

Urgency: No State Mandated Local Program: Yes Reimbursable: Yes

SUMMARY:

This bill requires special education funding rates be equalized to the 95^th percentile the year after the Local Control Funding Formula (LCFF) is fully funded, creates a funding mechanism for state support of special education preschool, establishes a high cost service allowance to provide supplemental funding on the basis of the number of students with severe disabilities, and changes the calculation of the declining enrollment adjustment to be based on school district enrollment, rather than Special Education Local Plan Area (SELPA) enrollment. The bill also states intent to implement its provisions over a five-year period.

FISCAL EFFECT:

1. Ongoing Proposition 98 General Fund (GF) costs of about $800 million to equalize special education funding rates to the 95^th percentile. (If this bill were to be implemented in equal increments over a five-year period, annual increases of about $160 million.)
2. Ongoing Proposition 98 GF costs of about $520 million to fund special education in preschool. (If this bill were to be implemented in equal increments over a five-year period, annual increases of about $100 million.)
3. Ongoing Proposition 98 GF costs of about $110 million to provide supplemental funding for students with severe disabilities. (If this bill were to be implemented in equal increments over a five-year period, annual increases of about $22 million.)
4. Ongoing Proposition 98 GF costs, potentially in the low millions to tens of millions of dollars, to provide funding to adjust how SELPAs and member school districts calculate declining enrollment. (If this bill were to be implemented in equal increments over a five-year period, annual increases of a few million dollars.) The state would need to reimburse SELPAs and school districts for the costs of adjusting the calculation of declining enrollment, if the Commission on State Mandates determines the bill’s requirements to be a reimbursable state mandate.

COMMENTS:

1. Current Law. Federal law—the Individuals with Disabilities Education Act (IDEA)—and corresponding state law require students with exceptional needs aged birth to 22 years be provided a free and appropriate public education in the least restrictive environment.
2. Special Education in California. According to the California Department of Education (CDE), in 2016 there were about 750,000 children aged birth to 22 years who were identified as having exceptional needs. About 680,000 of these children were enrolled in grades K-12, representing roughly 11% of K-12 enrollment. According to the Legislative Analyst’s Office (LAO), the share of California students receiving special education was virtually flat from the 1997‑98 school year through 2007‑08 school year, then grew notably over the last decade. The share of students diagnosed with autism has increased at an especially fast rate, more than doubling over that time period.
3. Special Education Funding. Special education in California is funded through a combination of federal, state and local funds, totaling $13.2 billion in the 2015-16 school year. Of this amount, about 60% comes from local funds, 30% comes from state funds and 10% comes from federal funds. State law requires funding be allocated to SELPAs, which are either a collection of local educational agencies (LEAs), single school districts, or a collection of charter schools. SELPAs develop allocation plans and disburse funding to LEAs to serve students.

About 85% of state special education funding is provided as categorical funds known as “AB 602.” AB 602 provides funding to a SELPA using a census-based method that allocates funds based on the total number of students attending school within its area, not the total number of students with disabilities in its area. AB 602 was based on the assumption that students with disabilities are fairly equally distributed in the student population and that providing funding based on overall enrollment would remove fiscal incentives to over identify students with disabilities.

1. Special Education Funding Equalization. AB 602 special education funding rates vary widely across SELPAs, ranging from $480 of average daily attendance (ADA) to $925 per unit. These inequities are a relic of the state’s prior funding system, which provided funding in unequal amounts to SELPAs based, in part, on a survey of special education expenditures in the 1979-80 school year.

This bill requires, after the first full fiscal year after full LCFF implementation, CDE compute an equalization adjustment for each SELPA, setting the target equalization rate at the 95^th percentile of statewide funding rates.

1. Special Education High-Cost Allowance. As described above, AB 602 provides census-based funding to incentivize schools to accurately identify the number of students who have disabilities. However, students with severe disabilities, which include autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, and severe intellectual disability, are more expensive to serve.

This bill proposes a new high-cost allowance for the purpose of providing supplemental funding to a SELPA on the basis of the number of pupils it serves with severe disabilities. The bill proposes to use prior year counts of students with severe disabilities to award funding to SELPAs, meaning it would be difficult for schools to over-identify students in year one. In addition, the amount of per-pupil funding this bill provides is quite low (about $500) relative to actual costs (often in the tens of thousands per student) and therefore is unlikely to drive overidentification.

1. Special Education Funding for Preschool. State law and federal law require all schools to serve all three- and four-year-olds with special needs, but the state provides no categorical funding for this population. Consequently, school districts tend to fund most of these services by diverting LCFF funds, although preschool-aged children do not generate LCFF for the district. According to the author, LEAs spent approximately $500 million in the 2014-15 school year for special education preschool services.

This bill would provide AB 602 funding specifically for special education for preschool students by adding an estimate of preschool ADA to the AB 602 funding formula. The state has no count of preschool-age ADA. Instead, this bill uses a proxy for preschool population based on kindergarten ADA.

This bill would not directly increase or improve the services offered to this population, but would likely free up a significant amount of LCFF for schools to use for other purposes.

1. Adjustment to the Calculation of Declining Enrollment. Under current law, a SELPA may choose the greater of current-year or prior-year ADA for apportionment purposes. To calculate ADA at the SELPA level, ADA from all districts within a SELPA are combined. This means, if a SELPA’s ADA is in decline in the current year, it can cushion the reduction in funding by choosing the prior year’s ADA. This approach, however, can result in funding disadvantages to certain districts in the SELPA. For example, a district might individually benefit from using their current-year ADA, but the SELPA might benefit from using its member district’s prior-year ADA.

To address this imbalance, this bill modifies the calculation of declining enrollment adjustments by allowing an individual school district, rather than a SELPA, to decide whether it would like to be funded at its current-year or prior-year ADA.

1. Timing. This bill would take effect in the first fiscal year following the full funding of the LCFF. The LCFF, created in 2013-14, set a per-pupil funding target for all students, with higher target for low-income and English learner pupils. The per-pupil funding target has been achieved in the current school year (2018-19). Presumably, if passed, this bill’s provisions would go into effect in the 2019-20 school year.
2. Cost Pressures Related to Special Education. According to LAO, over the last decade, total state and federal funding for special education has declined due to the drop in overall student attendance. During this period, however, total special education expenditures have increased, largely driven by the growing number of students receiving special education coupled with some students requiring more intensive services. As a result, local general purpose funding has been covering an increasing share of special education expenditures, rising from about 45% ten years ago to about 60% today. This increase has resulted in cost pressures to school districts.
3. Governor’s Budget Proposal. The Governor’s 2019-20 January budget proposal includes $577 million Proposition 98 General Fund for special education grants. Of the total amount, $390 million is ongoing and $187 million is one time. These funds would be allocated according to a formula whereby school districts and charter schools serving more than the statewide average share of students with disabilities and having an overall student population that is more than 55% English learner or low‑income would receive funding. Districts could use the funds to provide more support for students with disabilities, provide services to preschool‑aged children with disabilities or expand early intervention programs. Districts would be encouraged to use the one‑time funding for purposes such as acquiring new equipment or providing professional development. The LAO estimates the per-student rate under the proposal would be about $8,000 in ongoing funding.

In its analysis of the governor’s budget proposal, the LAO outlines other ways the Legislature could use the proposed funds to address special education. For example, the proposed funds could be used to equalize or make progress toward equalizing AB 602 per‑student funding rates (as outlined in this bill). The LAO estimates equalizing these rates at the 90^th percentile of existing rates would cost about $330 million. (However, equalizing rates to the 90^th percentile rather than the 95^th percentile would leave out Los Angeles Unified School District.)

1. Prior Legislation. AB 3136 (O’Donnell), of the 2017-18 Legislative Session, was nearly identical to this bill. The bill was held in the Senate Appropriations Committee.

Analysis Prepared by: Natasha Collins / APPR. / (916) 319-2081

Date of Hearing: March 13, 2019

ASSEMBLY COMMITTEE ON EDUCATION

Patrick O'Donnell, Chair

ABPCA Bill Id:AB 428 (

Author:Medina) – As Introduced Ver:February 7, 2019

SUBJECT: Special education funding

SUMMARY: Requires that special education funding rates be equalized to the 95^th percentile after the Local Control Funding Formula (LCFF) is fully funded, creates a funding mechanism for state support of special education preschool, establishes a high cost service allowance to provide supplemental funding on the basis of the number of students with severe disabilities, and changes the calculation of the declining enrollment adjustment that it is based on school district, rather than Special Education Local Plan Area (SELPA), enrollment. Specifically, this bill:

1. States the intent of the Legislature that the requirements of the act be implemented over the course of five years.
2. Requires that, in the first fiscal year following the full funding of the LCFF, the Superintendent of Public Instruction (SPI) compute an equalization adjustment for each SELPA, and sets the target equalization rate at 95^th percentile of statewide funding rates.
3. Specifies the method for calculating this equalization adjustment as follows:
4. Multiply the amount computed for each SELPA by the average daily attendance (ADA) used to calculate its funding for the year in which an appropriation is made for equalization.
5. Divide the amount appropriated for purposes an equalization adjustment by the statewide sum of the amount computed above.
6. Multiply the amount computed for the SELPA by the amount computed above.
7. Requires the SPI, in each year following an equalization adjustment, to perform the following computations to determine the statewide target amount per unit of ADA in order to determine the inflation adjustment and growth adjustment:
8. Total the amount of funding computed for each SELPA
9. Total the number of units of ADA reported for each SELPA for the fiscal year preceding the equalization appropriation
10. Divide the total funding by the total ADA
11. Establishes a funding mechanism for providing funding for preschool-age students in the AB 602 formula, by requiring that, for the purpose of providing funding for preschool-aged children with special needs, commencing with the first fiscal year after the full funding of LCFF, a SELPA that reports serving children three or four years of age who meet the definition in Section 56026, except for a special education local plan area that, as of December 1, 2018, reported exclusively serving children three or four years of age in transitional kindergarten or kindergarten, for purposes of calculating units of ADA, the SELPA count three times all units of ADA generated by children enrolled in kindergarten, less those children eligible for transitional kindergarten.
12. Requires that any growth in ADA generated by the preschool adjustment be funded at the prevailing statewide target rate.
13. Establishes a high cost service allowance for the purpose of providing supplemental funding to a SELPA on the basis of the number of pupils with severe disabilities, defined as autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, severe intellectual disability, both deafness and blindness, traumatic brain injury, and multiple disabilities.
14. For the 2019-20 fiscal year, requires the SPI to make the following computations to determine the high cost service allowance for each SELPA:
15. From the December 2018 pupil count, the number of pupils who have a severe disability, defined as: autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, severe intellectual disability, and those individuals who would have been eligible for enrollment in a development center for handicapped pupils, plus both deafness and blindness, traumatic brain injury, or multiple disabilities.
16. Multiply this amount by the statewide target amount per unit of ADA for the 2019–20 fiscal year.
17. Requires the SPI, for the 2020-21 fiscal year and each fiscal year thereafter, to make the same adjustment as required for the prior year, using a pupil count from December of the prior year of students who have a severe disability, as defined above.
18. Changes the definition of ADA for the purpose of calculating growth funding, to mean the total number of units of ADA of the districts or county offices which make up the SELPA, for the current or prior school year, whichever is greater, thereby allowing declining enrollment adjustments to be made on the basis of changes in district, rather than SELPA enrollment.

EXISTING LAW:

1. Establishes, commencing with the 1998-99 fiscal year, a “census based” funding system for the allocation of state special education funds, providing most funding appropriated for support of special education programs on the basis of the ADA of special education students enrolled in the prior year, multiplied by a funding rate unique to each SELPA. (EC 56836)
2. Establishes a calculation for determining a statewide target rate of funding used for the purpose of calculating the funding rate of ADA growth in each SELPA. (EC 56836.11)
3. Requires, in specified fiscal years, equalization adjustments to be made to increase the funding rates of SELPAs with rates below the 90^th percentile.
4. Establishes an extraordinary cost pool for the extraordinary costs associated with single placements in nonpublic, nonsectarian schools. (EC 56836.21)
5. Establishes a low incidence disability fund for costs associated with the education of students who are visually impaired, hearing impaired, and severely orthopedically impaired, and any combination thereof. (EC 56838.22)
6. Requires, through state and federal law, that children with exceptional needs between the ages of three and five be provided with a free and appropriate education. (EC 56026)

FISCAL EFFECT: Unknown

COMMENTS:

Need for the bill. The author states, “For decades the state has underinvested in its special education system, allowing unequal rates to disadvantage students in some regions for no reason, providing disincentives to invest early in the education of our students - when the return is greatest - and failing to provide additional resources to support students who require a higher level of service to succeed.

Multiple reports over the years have argued for targeted investments to fix our special education finance system and better support our special education students. One such report, the 2015 report of the California Special Education Task Force (convened by the State Board of Education, the Superintendent of Public Instruction, and the Commission on Teacher Credentialing) set out a goal of one coherent system that serves all students, with a vision that special education students would be viewed as general education students first. The Task Force report acknowledged the significant special education fiscal challenges faced by schools and recommended a number of steps to improve the system and student outcomes. This bill addresses several of their recommendations.

AB 428 would equalize base AB 602 funding rates to the 95^th percentile, establish a funding formula within AB 602 for programs serving preschoolers with disabilities, create a high cost service allowance to provide additional funding for students with significant high-cost disabilities, allow school districts to calculate a declining enrollment adjustment based on individual school district ADA (ADA) instead of aggregated SELPA ADA.

In these ways AB 428 would remedy several long standing deficiencies in our special education finance system, providing resources to help our students with disabilities reach their full potential.”

Recent reports and Governor’s Budget Statement. This analysis cites the following recent reports and recommendations frequently:

• Special Education Task Force (Task Force) report. In 2015, the Statewide Task Force of Special Education, convened the State Board of Education, the Superintendent of Public Instruction, and the Commission on Teacher Credentialing, issued a comprehensive report titled “One System: Reforming Education to Serve ALL Students.” This report made a number of recommendations regarding special education finance.
• Legislative Analyst’s Office (LAO) analysis. The LAO has for several years recommended that funding be appropriated to equalize special education funding rates. The LAO also provides much of the background information about special education finance which informs this analysis.
• Public Policy Institute of California (PPIC) report. In 2016 the Public Policy Institute of California issued a report titled, “Special Education Finance in California,” which analyzed California’s special education finance system in light of the principles that underlie the Local Control Funding Formula (LCFF): local control and accountability, transparency, and equity. In 2009, PPIC also released a report which looked broadly at special education finance ten years after the enactment of AB 602.
• Governor’s Budget Statement. In his 2017-18 Governor’s Budget Summary the Governor committed to engaging in stakeholder meetings throughout the spring budget process to solicit feedback on the current special education finance system. He stated that central to these discussions would be principles which are consistent with the LCFF and apply to all students, including students with disabilities. He stated that school funding mechanisms should be equitable, transparent, easy to understand, focused on the needs of students, and that general purpose funding should cover the full range of costs to educate all students.

Special education in California. Federal law, the federal Individuals with Disabilities Education Act (IDEA), and corresponding state law requires that students with exceptional needs aged birth to 22 be provided a free and appropriate public education in the least restrictive environment. IDEA was established in 1975 and was most recently reauthorized in 2004.

According to the CDE, in 2016 there were 754,000 children aged birth to 22 who were identified as having exceptional needs. 680,000 of these children were enrolled in grades K-12, representing roughly 11% of K-12 enrollment.

The most common disabilities among students are specific learning disabilities, speech and language impairments, and other health impairments, which together constituted about 73% of all students with exceptional needs in 2015. While the prevalence of students with Autism Spectrum Disability (ASD) is relatively rare (affecting about 1.5 percent of California students), the number of students diagnosed with ASD has increased notably over the last decade, from 2% of all disabilities in 2002 to 13% in 2015 (see chart below).

Viewed as a whole, there is a significant achievement gap between students with disabilities and their peers. The LAO notes that while performance on standardized tests (including those specifically designed for students with disabilities) has improved over the past several years, a majority of students with disabilities still fail to meet state and federal achievement expectations, and that 60 percent of these students graduate on time with a high school diploma and about two–thirds are engaged productively after high school (with about half enrolled in an institute of higher education and 15 percent competitively employed within one year after high school).

Special education finance in California. Special education in California is funded with a combination of federal, state, and local revenues, totaling $13.2 billion in 2015-16. In 2015-16 local general purpose funds covered the largest share of these costs ($8.2 billion, or 62 percent), followed by state special education categorical funds ($3.8 billion, or 43 percent), combined with federal special education funds ($1.2 billion, or 9 percent).

State law requires that funding be allocated to Special Education Local Plan Areas (SELPAs), which are either a collection of local educational agencies (LEAs), single school districts, or a collection of charter schools. The SELPAs develop allocation plans and disburse funding to LEAs to serve students.

About 85% of state special education funding is provided as categorical funds known as “AB 602” (Chapter 854, Statutes of 1997). This allocation method provides funding using a census–based method that allocates special education funds to SELPAs based on the total number of students attending school within the area. AB 602 was based on the assumption that students with disabilities are fairly equally distributed in the student population. The intent of AB 602 funding was to remove fiscal incentives to over-identify students with disabilities that existed under the prior J-50 model. AB 602 also included a “special disabilities adjustment” which accounted for variation in the enrollment of students with more severe disabilities. This adjustment was eliminated in 2011-12, and at the time totaled $74 million.

Local funds covering an increasing share of special education costs. In recent years local general fund dollars have been covering an increasing share of special education costs.

As shown in the adjacent chart, provided by the LAO, in the last ten years the local share of special education funding has increased from 48% to 62%. This is a result of a number of factors:

• As discussed below, the growth formula for AB 602 is based on overall student growth and not on growth in special education, and overall student growth has been flat while special education enrollment has increased significantly. The result has been a flat level of state funding for a growing student population.
• Federal special education funding has declined since 2013-14 due to sequestration and any adjustments have not kept pace with increasing costs. As noted above, the federal share of cost has declined from 14% in 2005-06 to 9% in 2015-16.
• Two compensation-related factors contribute to this increased local share: 1) since special education personnel are paid on the same salary schedules as general education personnel, any negotiated increases in compensation raise special education costs, and 2) in recent years the state has required LEAs to provide an increased share of contributions to the state teachers’ retirement system (CalSTRS).
• There has been a marked increase in special education placements which require a higher level of service (such as ASD), and a decline in placements requiring a lower level of service (such as Specific Learning Disability).

• Dedicated funding for higher cost placements, already small in proportion to overall funding, has either declined or remained flat, depending upon the source.
• Districts with a large number of fiscally independent charter schools which enroll less than a proportionate share of students with severe disabilities may find that district special education costs increase as their severely disabled students comprise a larger share of their special education enrollment. Data presented to the board of one large school district, for example, show that the district serves three times as many severely disabled students than the charter schools within the district.

• SELPAs report that 1) funding cuts during the recession reduced the provision of early intervention services which reduce the need for later, more costly services, and 2) some programs are providing a higher level of service for the same placements, as understanding of effective practices evolves.

Inequities in special education funding are a legacy of an informal survey conducted in 1979. As shown in the chart provided by the LAO below, AB 602 special education funding rates vary widely across SELPAs, ranging from $480 to $925 per unit of ADA in the districts comprising the SELPA. These inequities are a relic of the prior funding system.

From 1980, when the Master Plan for Special Education was enacted, until 1998 when AB 602 was enacted, state special education funding was allocated based on a model known as J-50. Under J-50 the state provided funding in unequal amounts to SELPAs based in part on an informal survey of special education expenditures in 1979–80. According to this Committee’s analysis of AB 602 in 1997, “reporting practices throughout the state were erratic and the reliability and accuracy of the information obtained from them [were] suspect.” In addition, school districts were required to contribute money from their local general fund at the same rate that was reported in 1979-80, and as a result local contributions varied widely.

The J-5- system was based on Instructional Service Personnel Units (IPSUs), which largely represented the cost of teachers. J-50 provided greater levels of funding to SELPAs that identified a larger proportion of students for special education and served students in more expensive settings, which often meant more restrictive placements. This system raised concerns that schools had a fiscal incentive to place students in more restrictive settings, potentially violating students’ rights to an education in the least restrictive environment under federal and state law.

When AB 602 was enacted in 1998, the state determined the new allocations by dividing the prior year funding received by total average daily attendance (ADA), effectively locking in the rate at which SELPAs were funded in that year. In the early years of AB 602, two rounds of equalization funds were allocated. In the 2013-14 budget the Legislature included $30 million for equalization, but this funding was vetoed.

The state funds enrollment growth in special education at a target rate which represents the statewide average ($530 per student in 2014–15), so that in a low funded SELPA growth is funded at a slightly higher rate per student. However, the LAO notes, statewide attendance has been virtually flat over the last 10 years, so this approach has had little effect on funding inequities. Nearly forty years after the Master Plan for Special Education, and twenty years after AB 602, significant funding disparities remain.

To understand the effect of these differences in rates on expenditures per special education pupil, it may be useful to consider the adjacent table, which was included in the Task Force report.

Recommendations for equalization of special education funding rates. For decades, reports have recommended that the state equalize special education funding rates. Some of the recent recommendations for equalization are shown below:

• For several years the LAO has recommended that the state equalize AB 602 rates to the 90^th percentile. The LAO notes that since 2013–14 the state has dedicated billions of new dollars toward implementing LCFF which, among other things, equalizes funding rates across districts by allocating based on a “gap” approach, such that districts receive additional funding based on the difference (or gap) between their prior–year funding level and their target LCFF funding level, but that because special education funding was not shifted into LCFF special education funding rates remain unequal.
• In 2015 the Task Force recommended that all SELPAs be funded at a new statewide target rate (90% of the current statewide average), that no SELPA would receive less funding than it did the year prior, and that the amount be adjusted in future years to reflect cost of living adjustments. It also recommended increasing the statewide target to $665 within five years.
• In 2016, PPIC recommended that the state equalize to the 90th percentile. Alternatively, they recommended equalizing to the 2007 per-ADA rate, the peak year per ADA. Finally, they offered the option of increasing funding to recognize the higher costs generated by rising caseloads relative to ADA and the shift towards more severe disabilities, while equalizing by withholding funding from districts at the top of the distribution.

This bill’s approach to funding special education equalization. This bill requires that, for the first full fiscal year after LCFF funding targets have been met, the SPI compute an equalization adjustment for each SELPA, setting the target equalization rate at the 95^th percentile of statewide funding rates. The Governor’s Budget for 2018-19 proposes to fully fund the LCFF targets, and 2019-20 is expected to be the first full year after full funding of LCFF. Equalization to the 95^th percentile is estimated to cost $787 million.

Special education preschool funding. State and federal law require LEAs to provide services for preschool-age students with exceptional needs. Dedicated support for costs of providing special education services for preschool age students comes from federal and local funds, but funding is not specifically provided for these students through AB 602. According to the author, LEAs spent approximately $500 million in 2014-15 for special education preschool services.

Federal funds are provided from two sources: Preschool-Local Assistance and Federal Preschool, totaling $97 million in 2014-15. State Preschool, which serves students with and without disabilities, was funded at $884 million in 2015-16. Full day state preschool provides an adjustment factor of 1.2 to the reimbursement rate for children with exceptional needs, with a rate of 1.5 for students with severe disabilities. The 2015 Budget Act added 2,500 part-day preschool slots, with priority for contractors who intended to use them to increase access for children with exceptional needs. Costs not covered by federal and other funds are covered by local funds.

Special education preschool services as an investment in later school success and in reduced costs. The Task Force notes that many children who receive interventions as infants and preschoolers make significant gains and are able to be educated in general education with their peers with little or no special education support as they enter the primary grades. They also note that early intervention efforts in recent years have contributed to reducing the number of preschoolers with milder disabilities who are in need of intensive special education services once they reach the primary grades, and that at the same time, the incidence of preschoolers with more significant disabilities such as ASD, requiring intensive and more costly services, has increased significantly. Finally, the Task Force notes that there is a severe shortage of general education preschool options which would provide these students with services in the least restrictive environment with their typically developing peers.

Writing in support of this bill, the Riverside County Superintendent of Schools notes that “approximately 35% - 40% of children with autism who receive early intervention return to the general education setting. Students with speech and language impairments, students who are Deaf/Hard of Hearing, or Visually Impaired, or have other low incidence disabilities but receive early intervention, are included in general education settings at much higher percentages.”

Preschool enrollment increasing rapidly, particularly enrollment of children with Autism Spectrum Disability. According to CDE data, in 2005-06 there were 38,563 preschool age students with exceptional needs. In 2015 there were 46,596 such children - an increase of 21% over ten years. The increase in special education enrollment among children of other ages was 7% over the same time period.

Between 2005-06 and 2015-16 the number of preschool age children identified with Autism Spectrum Disability (ASD) increased from 4,845 to 10,688 – an increase of 121%. The next highest increase in that time period was among students identified as having Other Health Impairments, who increased from 1,270 to 1,913, a 51% increase. In 2005-06 children identified with ASD comprised 13% of preschool enrollment; in 2015-16 children with ASD represented nearly 23% of all preschoolers with exceptional needs.

Recommendations for providing state support for preschool special education. Several reports have recommended that the state provide support for preschoolers with exceptional needs:

• The Task Force recommended that an additional $150 million dollars be provided for preschool children with disabilities, equating to approximately $3,000 for each preschool identified as needing special education services, with a cap so that funding would not exceed 11% of kindergarten and first grade enrollment. The Task Force also recommended that the state provide additional funds for facility modifications, professional learning opportunities for preschool staff, and increase the availability of slots in least restrictive environments.
• In 2016, PPIC also supported providing state funding for special education preschool, offering the idea of counting preschool attendance toward school and district average daily attendance (ADA). Alternatively they suggested boosting incentives to serve special education children by increasing the supplemental funding state preschool programs receive for special education students. They noted that one problem with this proposal is that districts in more affluent areas do not operate state preschool programs, but suggested that this option might reduce the emphasis on separate classes for special education preschool students.

This bill’s approach to providing state support for preschool special education. This bill provides funding for special education preschool by adding an estimate of preschool ADA to the AB 602 funding formula.

AB 602 provides funding on a census basis, allocating an amount per pupil enrolled in schools within each SELPA. Because the state has no count of ADA or enrollment of preschool age students, there is no pupil count to use as the basis for a census-based allocation for preschool age children.

In light of that, this bill uses a proxy for preschool population based on Kindergarten average daily attendance. This bill adds two additional years of Kindergarten ADA to AB 602, as a proxy for preschool special education enrollment. This is expected to require $457 million in funding. This approach allows preschool funding to be provided in a manner consistent with AB 602, without the creation of a new categorical program within special education, and without establishing a base year which would have to be periodically updated.

Growth funding for special education does not reflect actual growth. Though AB 602 is funded as a separate categorical program, growth in the overall program is funded at the same rate as the overall student population.

This method of funding special education growth would seem to conflate the separate issues of the distribution of disabilities and the incidence of them. In other words, disabilities may generally be evenly distributed across the state, but the incidence of disability may not move in tandem with the overall student population. For example, special education identification may increase at the same time that general education enrollment may be flat or declining.

This is indeed what has been happening in recent years, as the adjacent chart (provided by the LAO) shows. Overall ADA has been flat (and in many areas declining since 2005-06), growing by only 6,000, but special education enrollment has increased by 51,000. The result has been flat funding for AB 602 in spite of growth in special education enrollment.

Declining enrollment adjustment. One way in which this bill addresses growth is in the way it would modify the calculation of declining enrollment adjustments. This bill allows the “current or prior” decision to occur at the district level, prior to rolling up the totals to the SELPA level, locating the choice of where it reflects actual growth or decline.

Under current law, and similar to the manner in which declining enrollment is addressed for school district ADA, a SELPA may choose the greater of current or prior year for apportionment purposes. This allows a SELPA to “cushion” declines in enrollment. To calculate ADA at the SELPA level, ADA from all districts within a SELPA is combined. So if a SELPA’s overall ADA is in decline, it can cushion the reduction in funding by choosing the prior year ADA.

But what is good in the aggregate may not be good for individual districts. To use a simple and highly exaggerated example: A SELPA has three constituent districts. Two of them have five ADA and one has ten. The two smaller districts grow from 5 to 10 ADA. The larger district declines from 10 to 5 ADA. The combined total for the SELPA in the prior year would be 20 and the total in the second would be 25 ADA. The SELPA would then choose the current year because the total is higher. But this disadvantages the district which the adjustment is supposed to help, because that district would have benefitted by choosing the prior year. And if the increase/decline were reversed, with two districts declining and one growing, it’s possible that the decline in two districts could be masked at the SELPA level by high growth in another, eliminating the opportunity to use the declining enrollment adjustment at all.

Low incidence disabilities. This bill proposes a new high cost service allowance for the purpose of providing supplemental funding to a SELPA on the basis of the number of pupils with severe disabilities, defined as autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, severe intellectual disability, both deafness and blindness, traumatic brain injury, and multiple disabilities. The calculation of the allowance would be based on prior year counts of those students, and would be adjusted annually for prior year enrollment. The allowance would be equal to the average base rate, which is about $533. In total, the allowance is estimated to require $107 million in funding, which is similar to the prior low incidence disability adjustment (SDA), which totaled $74 million before it was eliminated.

Recent history illustrates why creating a pupil-count based allocation for special education is challenging, and requires careful consideration.

California’s experience moving from a model based on funding services tied to the identification of pupils (J-50) to a census-based model (AB 602) provides one illustration of the need for caution. As noted earlier, AB 602 markedly decreased the segregation of students with severe disabilities. PPIC found that the enactment of AB 602, and a similar policy change in the 1997 reauthorization of the IDEA, diminished the fiscal incentive to identify additional students as a means of increasing funding, and found evidence that the same pattern occurred in other states which adopted census-based models. For students with severe disabilities the effect was dramatic: according to the LAO, since AB 602 was passed, the proportion of students with severe disabilities served in mainstream classrooms has doubled from 15 percent to 30 percent.

The fate of the Special Disabilities Adjustment (described above) provides further evidence of the need for caution. As noted above, this adjustment was an original part of AB 602, designed to support SELPAs which had a greater share of higher cost placements. But when the time came to adjust the allocation based on changing local costs, conflict over who would lose and receive the funding made it impossible to re-allocate. After years of inability to resolve the issue and at least seven bills to extend the SDA for one or more years, the Legislature allowed the SDA to sunset.

This bill’s approach to a low incidence disability adjustment. In proposing a high cost service allowance, this bill attempts to 1) address concerns about overidentification and incentives to place students in restrictive placements, 2) get funding to SELPAs which are experiencing higher costs, 3) allow for adjustments over time.

This bill would provide the high cost service allowance based on pupil counts of severe disabilities, including ASD, which is the disability category experiencing the highest growth. This bill proposes to use prior year counts of students with severe disabilities, making the initial year “ungameable.” The amount of funding provided is quite low (approximately $533) relative to actual costs (often in the tens of thousands per student), and as a result is unlikely to drive overidentification. And the bill does not propose to tie funding to placements, as was the case with J-50.

The only scenario under which a district might be able to game the system would be, for a student with multiple disabilities, to elevate a severe disability as their primary disability. However, this would likely require the consent of the IEP team for each student, in some cases a medical diagnosis, and potentially modifications to the services provided. The additional funding would not be received until at least a year later, since the allowance is based on prior year enrollment. These factors would almost certainly outweigh the $533 adjustment received.

Prior and related legislation. AB 3136 (O’Donnell) of the 2017-18 Session would have required that special education funding rates be equalized to the 95^th percentile after LCFF was fully funded, created a funding mechanism for state support of special education preschool, established a high cost service allowance to provide supplemental funding on the basis of the number of students with severe disabilities, and changed the calculation of the declining enrollment adjustment that it is based on school district, rather than Special Education Local Plan Area (SELPA), enrollment. This bill died in the Senate Appropriations Committee.

AB 312 (O’Donnell) of the 2017-18 Session would have required that special education funding rates be equalized to the 90^th percentile and creates a funding mechanism for state support of special education preschool, after the LCFF is fully funded. This bill died in the Assembly Appropriations Committee.

SB 217 (Portantino and Roth) of this Session would establish the Special Education Early Intervention Grant Program, through which $4,000 would be allocated to LEAs for each 3 and 4 year old child with exceptional needs who is enrolled in transitional kindergarten, a California state preschool program, a federal Head Start program, or any other early education preschool program.

AB 1449 (Muratsuchi) of the 2017-18 Session would have created a supplemental grant within the LCFF for students with severe disabilities, as defined, as a percentage of LCFF base grants. This bill died in the Assembly Education Committee.

SB 1071 (Allen) of the 2015-16 Session would have required, upon an appropriation in the Budget Act, a permanent one-time adjustment to the base funding calculation for each special education local plan area to support special education and related services for three and four year old preschool children with exceptional needs. This bill died in the Senate Appropriations Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

Coalition for Adequate Funding for Special Education (co-sponsor)

California Association of School Business Officials (co-sponsor)

California School Boards Association (co-sponsor)
Albany Unified School District
Albany Unified School District Board of Education
Alhambra Unified School District SELPA
Alisal Union School District
Alta Loma School District
Anaheim Union High School District
Antelope Elementary School District
Antelope Valley SELPA
Association of California School Administrators
Atascadero Unified School District
Bellevue Union School District
Benicia Unified School District
Bonsall Unified School District
Brentwood Union School District
Briggs Elementary School District
Calaveras County Office of Education
Calaveras County SELPA
California Alliance of Child and Family Services
California Association of School Psychologists
California Association of Suburban School Districts
California Charter Schools Association
California Down Syndrome Advocacy Coalition
California Retired Teachers Association
California School Employees Association
California School Funding Coalition
California Teachers Association
Cardiff School District
Carlsbad Unified School District
Carmel Unified School District
Castaic Union School District
Central Valley Education Coalition
Claremont Unified School District
Clovis Unified School District
Columbia Elementary School District
Compton Unified School District
Conejo Valley Unified School District
Contra Costa SELPA
CORE Charter School
Cotati-Rohnert Park Unified School District

Covina-Valley Unified School District
Cypress School District
Del Mar Union School District
Dinuba Unified School District
Dixon Unified School District
East San Gabriel Valley SELPA
East Valley SELPA

El Dorado Charter SELPA
El Dorado County SELPA
El Dorado County Superintendent of Schools
El Segundo Unified School District
Elk Grove Unified School District
Encinitas Union School District
Escondido Union High School District
Escondido Union School District
Etiwanda School District
Evergreen Union School District
Fairfield-Suisun Unified School District
Firebaugh-Las Deltas Unified School District
Folsom Cordova Unified School District
Foothill SELPA
Foothill SELPA Community Advisory Council
Fresno County Charter SELPA
Fresno County SELPA
Fresno County Superintendent of Schools
Glendale Unified School District
Glendora Unified School District
Golden Valley Unified School District
Greater Anaheim SELPA
Gustine Unified School District
Hawthorne School District
Hope School District
Horicon Elementary School District
Hueneme Elementary School District
Irvine Unified School District
Kern County Superintendent Of Schools
KIPP Bay Area Public Schools
La Canada Unified School District
Lawndale Elementary School District

Loomis Union School District
Madera Unified School District
Magnolia Elementary School District
Martinez Unified School District
Mendocino County SELPA

Mendocino County SELPA Community Advisory Committee

Merced City School District
Merced County Office of Education
Merced County SELPA
Merced River School District
Merced Union High School District
Mid-Alameda County SELPA
Milpitas Unified School District
Mono County Office of Education
Monterey County Office of Education
Monterey County SELPA
Newhall School District
North Coastal Consortium for Special Education Community Advisory Committee
North Coastal Consortium For Special Education

North Inland Selpa
North Orange County SELPA
North Region SELPA
North Valley School, Redding NPS
Northeast Orange County SELPA
Oak Park Unified School District
Oak Run Elementary School District
Ocean View School District
Ojai Unified School District
Orange Unified School District
Palos Verdes Peninsula Unified School District
Piner-Olivet Union School District
Pleasant Valley School District
Rancho Santa Fe School District
Red Bluff Joint Union High School District
Red Bluff Union Elementary School District
Reeds Creek Elementary School District
Riverside County Superintendent of Schools

Rocky Point Charter School
San Bernardino County District Advocates For Better Schools
San Diego County Office Of Education
San Francisco Unified School District Community Advisory Committee For Special Education
San Gabriel Unified School District
San Joaquin County Office of Education
San Luis Coastal Unified School District
San Luis Obispo County SELPA
San Marcos Unified School District
San Marino Unified School District
San Mateo County SELPA
San Pasqual Union School District
San Ysidro School District
Sanger Unified School District
Santa Barbara County SELPA
Santa Barbara Unified School District
Santa Clarita Valley SELPA
Santa Rosa City Schools
Savanna School District
Sebastopol Independent Charter School
Selma Unified School District
SELPA Administrators of California
Solana Beach School District
Solano County Office of Education
Solano County SELPA
Sonoma County Charter SELPA
Sonoma County SELPA
South Bay IEP & Disability Parents
South Bay Union School District
Southwest SELPA
Stockton Unified School District
Sulphur Springs Union School District
Sutter County SELPA
Sutter Union High School
Sweetwater Union High School District
Tehama County SELPA
Torrance Unified School District
Travis Unified School District
Tri-City SELPA
Tustin Unified School District
Tustin Unified School District SELPA
Twin Rivers Unified School District
Vacaville Unified School District
Valley Center-Pauma Unified School District
Ventura County Office of Education
Ventura County SELPA
Ventura Unified School District
West Contra Costa Unified School District SELPA
West Covina Unified School District
Wheatland Union High School District
William S. Hart Union High School District
Wright Elementary School District
Yuba County SELPA

Numerous individuals

Opposition

None on file

Analysis Prepared by: Tanya Lieberman / ED. / (916) 319-2087