Individuals with Disabilities Education Act: Full Funding of State Formula

Individuals with Disabilities Education Act: Full Funding of State Formula

Order Code 97-433 EPW
Updated December 27, 2001
CRS Report for Congress
Received through the CRS Web
Individuals with Disabilities Education Act:
Full Funding of State Formula
Richard N. Apling
Specialist in Social Legislation
Domestic Social Policy Division
Summary
The grants to states program of the Individuals with Disabilities Education Act
(IDEA) assists participating states to serve school-age children with disabilities. The
state funding formula, which provides a foundation amount based on states’ FY1999
grants and allocates remaining amounts based on states’ shares of school-age children
and of school-age poor children, authorizes a maximum allotment per disabled child
served of 40% of the national average per pupil expenditure (APPE). Annual
appropriations have never been sufficient to provide each state its maximum allotment;
in FY2002, states will receive approximately 16.5% of the national APPE per disabled
child served. Some advocates for the program have called upon the Congress to fully
fund the formula. An estimated $18.2 billion would be required to provide states the
maximum allotment allowed per disabled child served in FY2002, about 2.4 times more
than the appropriation of $7.5 billion for FY2002. This report will be updated to reflect
major legislation and changes in data related to full funding.
Background
The grants to states program assists participating states in providing a free
appropriate public education (FAPE) to school-age children with disabilities.1 It is the
centerpiece of IDEA, reaching nearly 6.5 million children with disabilities and receiving
$7.5 billion in appropriations in FY2002. The 1997 IDEA amendments (P.L. 105-17)
required that funds be distributed to states under an “interim” formula based on the
formula that was in effect prior to the enactment of the 1997 Amendments until
appropriations for grants to states exceeded a trigger amount of $4,924,672,200.2 When
1 For further information on the grants to states program and on IDEA in general, see CRS Report
RS20366, Individuals with Disabilities Education Act: Overview of Major Provisions, by
Richard N. Apling and Nancy Lee Jones.
2 The “interim” formula was based mainly on the number of children with disabilities in a state
(continued...)
Congressional Research Service ˜ The Library of Congress

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the trigger was exceeded in FY2000, the “permanent formula” took effect. Under this
formula, states receive a “base year amount,” which is the amount they received in the
fiscal year prior to the fiscal year in which the trigger is surpassed (i.e., the FY1999
amount based on the “interim” formula). Of the funds above the amount necessary to
provide these base year amounts, 85% is distributed in proportion to each state’s share of
population ages 3 to 21 and 15% is distributed in proportion to each state’s share of
population ages 3 to 21 living in poverty. Certain minimum grants and caps on increases
are applied.3
Each state’s maximum authorized award is calculated as follows:
maximum state award = number of children served * 40% of national average per
pupil expenditure (APPE)4
It is important to note that the formula only specifies the maximum award a state can
possibly receive.5 In other words, the formula does not guarantee 40% of national APPE
per disabled child served; rather, it caps IDEA allotments at 40% of national APPE. The
actual size of state awards is contingent on annual appropriations for the program and
allocations under the “permanent formula.”
Full Funding Issue
IDEA is a voluntary program that assists states in educating children with disabilities.
As the Supreme Court explained in Smith v. Robinson, one of its early IDEA cases, the
program is “a comprehensive scheme set up by Congress to aid the states in complying
with their constitutional obligations to provide public education for handicapped
children.”6 Thus, the financial assistance under the grants to states program is intended
only to supplement state and local spending on the instruction of students with disabilities;
states and localities remain primarily responsible for the expense of special education and
related services.
The extent to which the federal government offsets the cost of special education and
related services has come into question. Critics point to the allocation formula’s funding
history as a failure on the part of the Congress to pay for its share of the cost of educating
disabled children. Annual appropriations have never been sufficient to provide each state
2 (...continued)
counted as receiving special education and related services. At a state’s discretion, this count may
be made on the last Friday of October or on December 1 of the fiscal year for which funds are
appropriated.
3 For further information on the “permanent formula,” see CRS Report RL30810, Individuals with
Disabilities Education Act (IDEA): Issues Regarding “Full Funding” of Part B Grants to States,
by Richard Apling. p. 5-11.
4 The APPE is for all K-12 public school students in the most recent preceding year for which data
are available.
5 Section 611(a)(2) of IDEA states: “... the maximum amount of the grant a state may receive
under this section for any fiscal year is ...” [emphasis added].
6 468 U.S. 992, 1009 (1984).

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with 40% of national APPE per disabled child served. At 16.5% of APPE, the FY2002
amount is as close as annual appropriations have ever been to 40%.7
Critics interpret the formula and the legislative history of P.L. 94-142, the Education
for All Handicapped Children Act of 1975 (which created the grants to states program),
as committing Congress to fully fund the program. In particular, they believe that
Congress would not have devised a specific formula if it did not intend to utilize it. They
argue that Congress gave careful thought to the proper federal contribution and settled
upon an expenditure factor of 40% of national APPE to represent the federal share that
should be provided to states to help with the expense of instructing students with
disabilities. Indeed, the House committee report for P.L. 94-142 addresses this point:
The Committee would fail to meet its obligation if it did not assess the full cost of
educating a handicapped child and assign some share of that cost as an equitable
portion to be borne by the Federal Government in carrying out the national policy and
objectives of the legislation. To have failed to set any dollar amount to be paid for each
handicapped child would have provided no guidance whatsoever to the budget and
appropriations committees. The Committee has in fact exhaustively studied the
educational needs of handicapped children and has made an informed determination of
what should be an appropriate contribution to State and local educational agencies to
help meet those needs. In making this determination, the Committee has considered the
urgent needs of handicapped children and the large burden borne by State and local
educational agencies in meeting those needs.8
The formula was one of the main issues debated during consideration of P.L. 94-142.
The House and Senate versions of the formula differed from the prior law formula and
from each other. The final version of the formula was developed by the conference
committee.9 In regard to Congress’s “commitment” to fully fund the formula, it is
interesting to note some of the floor statements made during House and Senate debate on
the conference report. For example, the ranking minority member on the House Education
and Labor Committee, Representative Albert Quie, stated:
I do not know in the subsequent years whether we will appropriate at those [authorized]
levels or not. I think what we are doing here is laying out the goal. Ignoring other
Federal priorities, we thought it acceptable if funding reaches that level. However, there
will be another Congress by that time, as well as many appropriations processes, and
7 Before FY2001, when appropriations accounted for 14.6% of APPE, the nearest the annual
appropriation has ever come to providing the maximum allotment per disabled student served was
in FY1979 when allocations to states represented 12.5% of national APPE.
8 U.S. Congress. House. Committee on Education and Labor. Education for All Handicapped
Children Act of 1975. Report to accompany H.R. 7217. H.Rept. 94-332, 94th Cong., 1st Sess.
Washington, GPO, 1975. p. 23. The House’s formula would have made allotments on the basis
of number of disabled children served multiplied by 50% of national APPE.
9 The conference report does not provide a rationale for the final version of the formula, including
the adoption of 40% of national APPE as the expenditure factor. See: U.S. Congress. Committee
of Conference. Education of Handicapped Children. Report to accompany S. 6. S.Rept. 94-455,
94th Cong., 1st Sess. Washington, GPO, 1975. p. 32-34.

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at that later time if it is felt too high a level has been set and false promises have been
made, we could be making the change at that time.10
The chairman of the Senate Budget Committee, Senator Edmund Muskie, stated:
And so, Mr. President, I believe we need to understand clearly that large outyear
authorizations, such as those included in this bill, do not mean that we will necessarily
spend at those levels.11
Such statements seem to indicate that there was some doubt among Representatives and
Senators about Congress’s obligation or ability to fully fund the formula. The views
expressed by Representative Quie and Senator Muskie illuminate the tension between the
authorization and appropriations processes and the effect on the federal role in financing
special education and related services.
Estimated Federal Contribution
The FY2002 appropriation for the grants to states program is approximately $7.5
billion. An additional $10.7 billion (or $18.2 billion overall) would be required to fully
fund the formula.
Figure 1, below, illustrates the magnitude of the difference between recent
appropriations levels and the approximate amounts necessary to fully fund the formula of
the grants to states program. The upward trend in the estimated full funding level is
attributable to both the rise in the national APPE and the increasing numbers of disabled
children served. ED’s estimate of the national APPE has increased by about 25% between
FY1996 and FY2002. The number of disabled children served has increased 15% during
that time period. The estimated full funding amount has increased 43% during that period.
In this same period, appropriations for the Part B grants to states program has more than
tripled — from $2.3 million to $7.5 billion.12
10 Congressional Record, v. 121, Part 29, November 18, 1975. p. 37026-27.
11 Congressional Record, v. 121, Part 29, November 19, 1975. p. 37419.
12 It is important to note that the estimated full-funding amount (and therefore the percentage of
APPE that an appropriated amount accounts for) changes during the year when ED updates its
estimates of APPE and the number of children with disabilities. The updated full-funding amount
is usually somewhat higher and the resulting percentage somewhat lower.

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Figure 1. Estimated Full Funding versus Recent Appropriations
for Selected Fiscal Years
$20
$18.2
$17.3
$18
$16.6
$15.4
$16
$14.5
$13.5
$14
$12.7
$12
$10
$7.5
$8
$6.3
$6
$5.0
Dollars in billions
$4.3
$3.8
$4
$3.1
$2.3
$2
$-
1996
1997
1998
1999
2000
2001
2002
Fiscal Year
Appropriations
Estimated Full Funding
It should be noted that fully funding the formula would fall short of providing 40%
of the actual expense above and beyond what would be spent on average for a child if he
or she were not disabled — i.e., the excess cost of providing special education and related
services. This is because the 40% maximum payment in the IDEA statute is based on the
assumption that children with disabilities are, on average, twice as expensive to educate
compared with the cost of educating other children. The measure of that excess cost is
the national average per pupil expenditure, which ED estimates is $7,034 for FY2002. In
fact, the average cost to educate children with disabilities is almost certainly more than
twice the cost of educating other children. ED estimates this excess cost for FY2002 to
be $8,230. Thus, using this estimate of “actual” excess cost, fully funding the IDEA
formula would only account for about 34% of the excess cost of serving disabled students.
Recent Legislation
During consideration of the reauthorization of the Elementary and Secondary
Education Act (ESEA), the Senate adopted an amendment (sponsored by Senators Harkin
and Hagel) to authorize and appropriate increased funds (in $2.5 billion annual increments)
for IDEA, until an estimated full funding amount was reached in FY2007. Estimated full
funding amounts then would have been appropriated for FY2008-FY2011. No specific
amounts would have been appropriated for subsequent fiscal years. Some Members
argued that providing “mandatory” funding for IDEA would remove any impetus to
reform the program and that Congress is committed to full funding, as evidenced by the
224% increase in Part B state grants since FY1995. Ultimately the Conference Committee
on H.R. 1 rejected the Senate proposal.