Individuals with Disabilities Education Act (IDEA): Issues Regarding "Full Funding" of Part B Grants to States

Individuals with Disabilities Education Act (IDEA): Issues Regarding "Full Funding" of Part B Grants to States

Order Code RL30810
CRS Report for Congress
Received through the CRS Web
Individuals with Disabilities Education Act (IDEA):
Issues Regarding “Full Funding” of
Part B Grants to States
Updated February 15, 2001
Richard N. Apling
Specialist in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

Individuals with Disabilities Education Act (IDEA):
Issues Regarding “Full Funding” of Part B Grants to
States
Summary
The Individuals with Disabilities Education Act (IDEA) is the major federal
statute that supports special education and related services for children with
disabilities. As a condition of accepting IDEA funding, the Act requires that states
and local educational agencies (LEAs) provide a free appropriate public education
(FAPE) to each eligible child with a disability. Providing special education and
related services can be expensive. When Congress enacted the predecessor legislation
to IDEA in 1975, the assumption was that education for children with disabilities was,
on average, twice as costly as education for nondisabled children. At that time,
Congress authorized the federal government to pay up to 40% of each state’s “excess
cost” of educating children with disabilities. The federal share of the excess cost —
sometimes termed the IDEA “full-funding” amount — is calculated by taking 40% of
the national average per pupil expenditure (APPE) times the number of children
served under the program in each state.
Although Congress in recent years has substantially increased IDEA funding
(funding for Part B grants to states has more than doubled since FY1996), the current
full-funding amount has never been achieved. As a result, some Members of
Congress have pressed for the federal government to pay its “full share” of the costs
of educating children with disabilities. Resolutions to this effect have been passed.
Legislation has been proposed that would set specific authorization targets for
achieving full funding in future years. Legislation has also been proposed that would
make full funding mandatory.
This reports discusses some of the issues that could arise if full funding of IDEA
were to be reached. For example, achieving full funding will require approximately
$10 billion more than current Part B appropriations, and this amount is likely to grow
substantially over time. Moreover, full funding could provide states and LEAs with
incentives to “over identify” children with disabilities to maximize funding, which is
an issue of congressional concern, although state and local administrators claim that
increased funding is never an incentive for identifying disabilities.
In addition, full funding may produce funding inequities among states and LEAs.
A reason for this is that full funding is based on a national average cost estimate while
state costs are assumed to differ substantially. Similarly, an average cost estimate
does not recognize that some types of disabilities are much more expensive to address
than others, and the distribution of children with severe (and more expensive)
disabilities may cluster in some areas that have outstanding medical facilities or
exemplary programs for specific disabilities. The determination and distribution of a
full funding amount is likely to under-compensate states and LEAs with higher costs
and over-compensate those with lower costs. The report, which will not be updated,
concludes with possible additions or alternatives to full funding, that might address
congressional concerns.

Contents
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background on IDEA and “Full Funding” . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Full-Funding Provision Under Current Law . . . . . . . . . . . . . . . . . . . . . 5
Current Funding Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Recent Legislative Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Possible Issues If “Full Funding” Were Provided . . . . . . . . . . . . . . . . . . . 11
Determining Total Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Distributional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Increased Incentive to “Over-Identify” Children With Disabilities . . . 15
Allocations to LEAs and Intermediate Units . . . . . . . . . . . . . . . . . . . 16
The Cost of Special Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Possible Interim Steps or Alternatives to “Full Funding” . . . . . . . . . . . . . 20
Increase Funding for Prevention . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Supplement Funding for Expensive Disabilities . . . . . . . . . . . . . . . . . 21
Change the Calculation of “Full Funding” . . . . . . . . . . . . . . . . . . . . . 22
List of Figures
Figure 1. Estimated Components of Special Education Funding
(Assuming Full Federal Funding of 40% of APPE) . . . . . . . . . . . . . . . . . . . 7
Figure 2. Estimated Components of Special Education Funding
(at FY2001 Funding Levels) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
List of Tables
Table 1. Funding History for IDEA Part B Grants to States . . . . . . . . . . . . . . . 8
Table 2. States At and Below Hypothetical “Full Funding” Based on
Allocating $14 Billion Using FY1998 Data . . . . . . . . . . . . . . . . . . . . . . . 15
Table 3. Estimated Idea “Full Funding” Amounts Based on State and
National Average per Pupil Expenditures (APPE) . . . . . . . . . . . . . . . . . . 19

Individuals with Disabilities Education Act
(IDEA): Issues Regarding “Full Funding” of
Part B Grants to States
Overview
The Individuals with Disabilities Education Act (IDEA) is the major federal
statute that supports special education and related services for children with
disabilities. The IDEA statute has four parts:
! Part A contains general provisions.
! Part B authorizes two state grants programs: the so called “grants to states”
program, which deals with special education for school-age children, and the
preschool grants program.
! Part C authorizes a third state grants program for infants and toddlers.
! Part D authorizes various national programs, such as research, technical
assistance, and dissemination.
Unless otherwise noted, this report deals with the Part B grants to states program,
which is by far the largest part of IDEA, and any reference to IDEA or to Part B is
meant to refer to that program.
As a condition of accepting IDEA Part B funding, the Act requires that states
and local educational agencies (LEAs) provide a free appropriate public education
(FAPE) to each eligible child with a disability. Providing special education and
related services can be expensive. When Congress enacted the predecessor legislation
to IDEA in 1975, the assumption was that education for children with disabilities was,
on average, twice as costly as education for other children. At that time, Congress
authorized the federal government to pay up to 40% of each state’s “excess cost” of
educating children with disabilities. That amount–sometimes termed the IDEA “full-
funding” amount–is calculated by taking 40% of the national average per pupil
expenditure (APPE) times the number of children served under the program in each
state.
Although Congress in recent years has substantially increased IDEA funding
(funding for Part B grants to states has more than doubled since FY1996), the current
full-funding amount has never been approached.1 As a result, some Members of
Congress have pressed for the federal government to pay its “full share” of the costs
1As noted later in this report, the authorized full-funding amount began at 5% of APPE and
was raised in steps to 40% of APPE over several years. In the first 2 years of the
authorization, full funding was achieved, but funding has never been close to 40% of APPE.

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of educating children with disabilities. Resolutions to this effect have been passed.
Legislation has been proposed that would set specific authorization targets for
achieving full funding in future years. Legislation has also been proposed that would
make full funding mandatory.
This report discusses some of the issues that would arise if full funding of IDEA
were to be approached or achieved. This first section of the report provides general
background on IDEA and on the “full funding” discussion. The report next describes
how funds are currently distributed. The third section briefly reviews recent
legislation aimed at providing increased or full funding. Following that, the report
outlines possible policy issues if full funding were provided. The report concludes
with some possible alternative legislative strategies that could be considered in lieu
of full funding or as interim steps until full funding is provided.
Background on IDEA and “Full Funding”
As a condition of accepting IDEA funding, the Act requires that states and LEAs
provide FAPE to each eligible child with a disability. The Act also requires the
provision of related services (such as, transportation, physical therapy, psychological
services, and counseling) that are necessary for children with disabilities to participate
in and benefit from their public education experience. In addition, IDEA guarantees
various rights to children and their parents. For example, parents must be members
of the planning team for the individual educational program (IEP), which IDEA
requires for each eligible child.
When Congress enacted the predecessor legislation to IDEA2 in 1975, the
assumption was that education for children with disabilities was, on average, twice as
costly as education for other children. The report accompanying the House bill (H.R
7217), which became P.L. 94-142, illuminates congressional thinking at the time:
It is well established that the average cost of educating handicapped children is
well above the national per pupil average for all children as evidenced by the
findings of the National Educational Finance Project ... which reported an average
cost index among the various diagnostic categories of handicapping conditions of
1.9 above the average cost for nonhandicapped children. (H.Rept. 94-332, p. 12)
This average cost factor of 1.9 times the cost of educating nondisabled children
apparently was rounded to 2.0 or twice as expensive. This is evidenced by a
statement on the House floor by Representative Brademas during the debate on the
House bill:
2Federal special education legislation existed prior to 1975 — most notably the Education of
the Handicapped Act (EHA). P.L. 94-142 (the Education for All Handicapped Children Act
of 1975) substantially amended the EHA, creating the essential structure and principles of
federal assistance to special education that are still reflected in current law. In 1990, the name
of the Act was changed to Individuals with Disabilities Education Act (IDEA) by P.L. 101-
476. Congress made extensive amendments to IDEA in 1997 (P.L. 105-17); however the
basic characteristics of the Act resemble those first enacted in 1975.

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...it costs more money to educate handicapped children. The best estimate we have
is that generally speaking it costs twice as much to educate a handicapped child as
it does a nonhandicapped child. (Congressional Record, House July 29, 1975, p.
25534)
As we shall see, this assumption is still reflected in current law.
The House report (H.Rept. 94-332) points out that federal funds are only for
excess costs:
...monies must be directed toward those “excess cost” factors.... A local school
district must determine its average annual per pupil expenditure for all children
being served, and then apply the Federal dollars only to those additional cost
factors for handicapped children beyond the average annual per pupil expenditure.3
(p. 13)
Given an estimate of the average excess cost for educating children with
disabilities, the Congress determined that the federal government should pay some
share of this excess cost. The House-passed bill called for a maximum funding level
that would pay 50% of the average excess cost. However, concern was expressed,
both in report language and in floor debate on the bill, that aiming to pay a substantial
proportion of the excess cost for educating these children was unrealistic and probably
unattainable. For example, Representative Ashbrook contrasted FY1975 funding for
special education of $100 million with estimates of $2.4 billion for FY1975 and $3.8
billion for FY1978 that full funding might cost (H.Rept 94-332, p. 23). Calling these
funding levels “totally unrealistic,” he went on to charge that the legislation
represented an “empty promise” and “a giant shell game.” (Congressional Record,
House July 29, 1975, p. 25534-25535)
Presumably as a result of these and other concerns, the final Act reduced the
federal maximum payment to 40% of the national APPE and phased in the maximum
over a period of 5 years. A state’s maximum authorized grant was the number of
children ages 3 to 21 receiving special education in the state times:
! 5% of the national APPE for FY1977,
! 10% of APPE for FY1978,
! 20% of APPE for FY1979,
! 30% of APPE for FY1980, and
3This may be the source of some confusion about the application of federal funds to the
“excess cost” of educating children with disabilities. While LEAs may apply federal funds
only to their excess costs for educating these children, the maximum federal share of 40% of
the national average excess costs (i.e., 40% of the national APPE) is referenced only in the
state funding formula provisions of the Act. Thus there would appear to be no intent, even
at maximum funding levels, to fund any particular proportion of each individual LEA’s excess
costs for educating children with disabilities. Thus even if a state received its maximum
authorized IDEA grant, there is no assurance that this would represent 40% of the excess cost
for each LEA in that state.

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! 40% of APPE for FY1981 and succeeding fiscal years.4
There continues to be a debate about whether Congress at that time meant the
40% funding level as a federal promise or commitment to fund this portion of special
education costs or whether the 40% level was a goal to be worked toward. Debate
in 1975 does not provide a clear answer to this question. Some advocates for the bill
(such as Representative Brademas and Senator Williams) did use words such as
“commitment” and “promise.” For example, in the Senate debate on the conference
report Senator Williams noted that the final compromise legislation would
assure that our promises to handicapped children are realistic and that those
promises can be kept. (Congressional Record, November 19, 1975. Senate page
37413, emphasis added)
Representative Brademas, during the House debate on the conference report,
maintained that the federal government by means of the compromise formula in the
final bill
makes a commitment to pay a gradually increasing percentage of the national
average expenditure per pupil times the number of handicapped children receiving
special education and related services. (Congressional Record, November 18,
1975. House page 37024, emphasis added)
At the same time, advocates appeared to view the authorized federal share as a
goal, with actual funding decisions left to the Appropriations and Budget Committees.
Representative Perkins — chairman of the House Education and Labor Committee
— pointed out
that we are not voting on a spending measure. We are voting on an authorization
bill which proposes a goal of providing a certain level of Federal support for the
education of handicapped children ... (Congressional Record, July 29, 1975.
House page 25536, emphasis added).
4 See Section 611(a)(1) of P.L. 94-142. During the House debate on the final bill,
Representative Ashbrook indicated that this approach was “more realistic.”
I voted against the bill ... when it came to the House floor. I was deeply concerned
about the irresponsible and unrealistic authorization levels in the bill. ... Although
I still have some doubts about the level of funding, this bill is vastly improved over
both the House and Senate version. I commend the conferees for taking a more
realistic approach and therefore I will vote for the adoption of the conference
report. (Congressional Record, November 18, 1975. House page 37028)
The final House vote was 404 yeas, 7 nays, and 22 not voting. (Forty-four Members had
voted against the original House bill.)

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Representative Brademas, referring to the House report on the bill, noted that
it is not anticipated that that much money would actually be appropriated. The
report also makes clear that the committee anticipates that the Committee on the
Budget and the Committee on Appropriations would make their own judgments on
how much money to recommend for this program in light of revenues available and
in light of other competing priorities. (Congressional Record, July 29, 1975.
House page 25535)
The Full-Funding Provision Under Current Law
Current law still pegs a state’s maximum IDEA Part B grant5 to the product of
the number of children with disabilities served and 40% of the national APPE:6
Maximum amounts — The amount of the grant a State may receive under this
section for any fiscal year is—
(1)
the number of children with disabilities in the State who are receiving
special education and related services—
(a)
aged 3 through 5 if the State is eligible for a grant under Section
619 [preschool grants, which all states currently receive]; and
(b)
aged 6 through 21; multiplied by
(2)
40% of the average per-pupil expenditure in public elementary and
secondary schools in the United States. (Section 611(a)(2)).
This maximum grant calculation is still based on the assumption that the average
cost of educating children with disabilities is twice the average cost of educating other
5The maximum grant provision applies only to the Part B grants to states provisions of IDEA.
These grants represent most of the funding for IDEA and help fund services for school-aged
children with disabilities. IDEA authorizes two other state grants programs (the preschool
grants and grants for infants and toddlers with disabilities) as well as various national
programs.
6The APPE is for all K-12 public school students in the most recent preceding year for which
data are available.

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children (i.e., two times the national APPE).7 That is, the total average cost for
educating a child with a disability is equal to:
the national APPE (the average cost of educating other children) + the national
APPE (the excess or additional average cost of educating children with
disabilities).
Congress has determined that the maximum that will be available under IDEA Part
B grants to states is 40% of the excess cost, i.e., 40% of the national APPE.
Figures 1 and 2 below illustrate this excess-cost concept. In Figure 1, the chart
represents the total average cost of educating children with disabilities. The left half
of the chart represents the national APPE — the average cost of educating children
in public school. The right half of the pie chart is the excess cost for educating
children with disabilities — i.e., the average cost over and above the average cost of
educating all students. Again, the assumption underlying IDEA “full funding” is that,
on average, the total cost of educating children with disabilities is twice the average
cost (national APPE) of educating other children. The upper right wedge in the
Figure 1 chart represents “full federal funding,” i.e., 40% of the national APPE.
Figure 2 represents the same concept, except that it represents the actual FY2001
federal share of the excess cost (14.9%).
7 By some estimations, special education is more than twice as expensive as education for
other children. For example, the U.S. Department of Education, based on Kakalike, J.S.,
W.S. Furry, M.A. Thomas, and M.F. Carney. The Cost of Special Education. Santa
Monica, CA: Rand Corp, 1981. (Hereafter cited as Kakalike, Furry, Thomas, and Carney,
Cost of Special Education.), estimates that special education is about 2.17 times more
expensive. In addition, for some children special education can be much more than twice as
expensive. For example, in a recent U.S. Supreme Court case (Cedar Rapids Community
School District v. Garret F., 526 U.S. 66 (1999)) the court ruled that the school district was
obliged under IDEA to provide extensive health services to the student. Justice Thomas, in
his dissenting opinion in Garret F., noted that the school district would have to hire an
additional employee to provide the one-to-one care Garret F. requires, which “will cost a
minimum of $18,000 per year.” (p. 8) This is nearly 2½ times what the U.S. Department of
Education (ED) estimates is the national average additional cost for serving children with
disabilities in public schools and apparently only accounts for the salary of a health-care
attendant, not for additional special education and related services that Garret F. might
require to ensure he receives FAPE.

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Figure 1. Estimated Components of Special Education Funding
(Assuming Full Federal Funding of 40% of APPE)
Federal Full-Funding
of Excess Cost
(40%)
National Average Per
Pupil Expenditure
Remaining State and
Local Excess Cost
Figure 2. Estimated Components of Special Education Funding
(at FY2001 Funding Levels)
FY 2001 Federal Funding
of Excess Cost (14.9%)
National Average Per
Pupil Expenditure
Remaining State and
Local Excess Cost

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The 40% of the national APPE times the number of children with disabilities
served is the so-called federal “full funding” amount under the Act.8 This amount is
not constant but changes at least annually as the number of children with disabilities
and the APPE change. Both of these factors have increased significantly since P.L.
94-142 went into effect. For example, the national APPE for FY1981 was $2,168
compared with $6,660 for FY2001, and the number of children with disabilities for
FY1981was 3.94 million versus 6.27 million for FY2001. Thus, as Table 1 shows,
the amount necessary for full funding has also increased substantially and is likely to
increase further in the future. For example, the estimated full funding amount for
FY1981 (the first year for which full funding was 40% of APPE) was about $3.4
billion. The estimated full funding amount for FY2001 is nearly $17 billion (about
five times as much as the FY1981 amount).
Table 1. Funding History for IDEA Part B Grants to States
Actual
Appropriations
appropriations
Estimated
for IDEA Part
Authorized %
as % of
federal full
B grants to
of estimated
estimated
funding
FY
states (in $000)
excess cost
excess cost
(in $000)
1977
$251,770
5%
5.1%
$249,178
1978
566,030
10%
10.2%
555,516
1979
804,000
20%
12.5%
1,284,640
1980
874,500
30%
12.0%
2,189,387
1981
874,500
40%
10.2%
3,417,635
1982
931,008
40%
9.9%
3,756,984
1983
1,017,900
40%
9.5%
4,279,968
1984
1,068,875
40%
9.1%
4,687,462
1985
1,135,145
40%
8.9%
5,090,666
1986
1,163,282
40%
8.4%
5,532,030
1987
1,338,000
40%
9.1%
5,850,468
1988
1,431,737
40%
8.7%
6,559,022
1989
1,475,449
40%
8.2%
7,181,244
1990
1,542,610
40%
7.9%
7,782,743
1991
1,854,186
40%
8.6%
8,593,267
1992
1,976,095
40%
8.4%
9,393,494
1993
2,052,728
40%
8.2%
10,003,507
1994
2,149,686
40%
8.0%
10,732,504
1995
2,322,915
40%
7.8%
11,872,137
8It is important to note that the formula only specifies the maximum award a state can
possibly receive. The actual size of state awards is contingent on annual appropriations for
the program. 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). 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 per disabled child served.

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Actual
Appropriations
appropriations
Estimated
for IDEA Part
Authorized %
as % of
federal full
B grants to
of estimated
estimated
funding
FY
states (in $000)
excess cost
excess cost
(in $000)
1996
2,323,837
40%
7.3%
12,699,024
1997
3,107,522
40%
9.2%
13,460,630
1998
3,801,000
40%
10.5%
14,457,195
1999
4,301,000
40%
11.1%
15,445,347
2000
4,976,685
40%
12.3%
16,194,156
2001
6,323,685
40%
14.9%
16,988,328
Note: FY1998-FY2001 appropriations exclude funds for studies and evaluations of $6.7 million,
$9.7 million, $13 million, and $16 million respectively. Estimates of full funding amounts and
percentages of APPE will change for any fiscal year for which ED revises data to calculate these
estimates.
Source: Table prepared by Congressional Research Service (CRS) from U.S. Department of
Education (ED) data.
Current Funding Formula
To understand how fully funding IDEA Part B grants to states would impact
state IDEA funding, it is important to understand how these funds are currently
allocated under the Act. Until the enactment of the 1997 amendments to IDEA, Part
B grants to states were allocated essentially based on each state’s share of the total
children with disabilities served. The 1997 amendments made important changes in
this formula. Until a “trigger” appropriation of slightly more than $4.9 billion was
reached, funds continued to be distributed under the prior formula, i.e., based on
shares of children with disabilities. When the trigger was exceeded for FY2000, each
state received a “base grant” equal to the amount it received from funds appropriated
in the year prior to the year in which the trigger was surpassed. Of the remaining
funds, 85% were allocated based on states’ shares of total population ages 3 to 219
and 15% were allocated based on shares of poor children in that age group.
To prevent massive changes from year to year resulting from the formula change,
the 1997 amendments placed certain restrictions on how much states could gain or
lose. No state can receive a grant that is more than 1.5 percentage points above the
percentage increase in the overall appropriation. Thus if the overall increase from one
year to the next is 10%, no state’s allocation could be more than 11.5% greater than
its grant the previous year. The 1997 amendments also provided certain minimum
state amounts. No state can receive a grant less than the greatest of:
9The actual age range varies from state to state depending on the years for which the state
provides free appropriate public education for children with disabilities.

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! the amount a state received in the year prior to the institution of the “new”
formula (the base year) and one-third percent of the difference between
appropriations for the current year and appropriations for the base year (the
latter amount is about $6.7 million for FY2001),
! the percentage increase from the prior year less 1.5% (based on the above
example: 10%-1.5% = 8.5% increase above the previous year’s grant),
! 90% of the percentage increase (90% of 10% = 9% increase in the above
example), and
! the grant amount the state received in the prior year.
Finally no state may receive a grant that is more than its “full funding” amount (that
is, the “40% amount”).
The House and Senate reports provide the rationale for these changes:
The Committee developed the change in formula to address the problem of over-
identification of children with disabilities ....
The Committee has squarely faced this problem by shifting, once the targeted
threshold is reached, to a formula of which 85 percent of additional funds is based
on the total school age population and 15 percent is based on the poverty statistic
for children in a State. This system was encouraged in the 1994 report of the
Department of Education’s Inspector General. The Inspector General noted:
‘‘Because [a population-based] method [of allocating funds] uses objective data
derived for other purposes, [this method] eliminates the financial incentives for
manipulating student counts [that exist in the current formula], including retaining
students in special education just to continue receiving Federal funds.’’ The
Committee added a poverty factor to the formula because there is a link between
poverty and certain forms of disability. This concept was also encouraged by the
Inspector General’s report.10
When the “trigger” was surpassed for the first time in FY2000, the amount
above the “trigger” (about $670 million of nearly $5 billion or 14% of total Part B
grants to states) was allocated under the new formula. As appropriations approach
full funding amounts, the percentage allocated under the new formula will grow, while
the base amounts (originally determined by the numbers of students receiving special
education) will remain the same. For example, at an appropriations level of $12
10H.Rept. 105-95, p. 88-89; S.Rept. 105-17, p. 8-9. The House and Senate reports
acknowledge that “it is unlikely that individual educators ever identify children for the
additional funding that such identification brings.” In the aggregate, however, financial
incentives may reduce the scrutiny that children for special education referral may receive.
The reports observe that “over-identification” is most prevalent for African-American males.
On the other hand, the reports admit that under identification may remain a problem in some
areas.

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billion, about 65% or more than $7 billion would be allocated based on population
and poverty.
Recent Legislative Action
Because of concerns about the state and local burden of funding special
education and related services, Congress in recent years has become increasingly
concerned that federal funding for IDEA Part B grants to states is inadequate. As a
result, funding for these grants has recently grown substantially. (See Column 2 of
Table 1 above.) For example, funding for FY2001 is more than 2½ times the
FY1996 amount.11
To further relieve state and local funding burden, some Members of Congress
have called for even greater funding increases in IDEA funding to achieve “full
funding” or maximum funding of IDEA. Congressional proposals during the 106th
Congress took several forms:
! Resolutions: For example, H.Con.Res 84 “urges full funding of federal special
education programs and recognizes that it should be the top funding priority
at the K-12 level, which was agreed to by a vote of 413-2, 1 present. ”
! Modifications to IDEA Part B authorization of appropriations: H.R. 4055/S.
2341 would have specified authorization amounts for the grants to states
program and increased the authorization level $2 billion each year through
FY2010.12
! Changes to the status of IDEA funding: For example, H.R. 5180 would have
changed the maximum grants states could receive to the minimum states
could receive and would have phased in the minimum grant as a percentage of
APPE from 20% in FY2002 to 40% in FY2006, increasing the minimum
percentage by 5 percentage points each of the years in between.
Possible Issues If “Full Funding” Were Provided
Although appropriations for IDEA Part B grants to states have increased
substantially over the last few years, the current amount is not even half way to
providing full funding. The current estimate is that nearly $17 billion would be
required to fully fund Part B grants. This is more that $10 billion above the FY2001
appropriation for the program. Full funding would require either that appropriations
for the Department of Education overall would have to increase by about 25% or that
11Most of the increased funding for IDEA over the last few years has gone for Part B grants
to states. The total appropriations for IDEA minus the grants to states appropriation rose less
than 20% between FY1996 and FY2001.
12Current law authorizes “such sums as may be necessary” to carry out the grants to states
programs (Section 611(j)).

CRS-12
funding for other programs would have to be cut significantly. For example, if all
FY2001 Title I of Elementary and Secondary Education Act (ESEA) appropriations
were transferred to Part B grants, full funding would still not be achieved. In addition
to the significant increase in funding required, reaching a full-funding level for IDEA
Part B grants raises several other issues, which this section discusses.
Determining Total Appropriations. One issue in “fully funding” IDEA is
determining exactly how much funding is necessary. As noted above, this amount is
based on the product of the number of children with disabilities and 40% of the
national APPE. The guidance for determining the number of children appears to
come from Section 611(d)(2) related to the “interim formula” for the program, which
states in part:
the determination of the number of children with disabilities receiving special
education and related services ... may, at the State’s discretion, be calculated as
of the last Friday in October or December 1 of the fiscal year for which the funds
are appropriated.
Under appropriations levels below the trigger amount for the new formula, this
provision did not cause any difficulty. Funds could be appropriated as of October 1
(the beginning of the fiscal year); ED would begin receiving data from the states at the
end of October; and ED would distribute the appropriated funds on July 1 of the next
calendar year because IDEA is a “forward funded” program. For example, funds
appropriated in October 1998 for FY1999 were distributed beginning on July 1, 1999.
There was ample time for ED to obtain final child counts to distribute IDEA grants
to states funds under the “interim formula.” Nor does the availability of data on
numbers of children with disabilities create particular difficulties now that the
“permanent” formula is in effect, because the base amount under the formula for each
state is derived from each state’s FY1999 grant. However, if the Congress decided
to “fully fund” the grants to states program, the data necessary to determine full
funding for a given fiscal year would not be available on or before October 1, since
states would not begin collecting those counts until the end of October and some
would wait until December 1. Presumably prior year data or a projection for the
current fiscal year could be used. To avoid confusion, any legislation appropriating
a full funding amount should specify which child count data ED should use. These
data, of course, would need to be the same as those determining the full-funding
appropriations.
The full funding calculation also depends on the national APPE, and estimates
of this factor can vary. Section 611(a)(1)(B)(4) of IDEA before it was amended by
the 1997 IDEA amendments defined APPE to mean:
the aggregate current expenditures, during the second fiscal year preceding the
fiscal year for which the computation is made (or, if satisfactory data for such year
are not available at the time of computation, then during the most recent preceding
fiscal year for which satisfactory data are available).

CRS-13
ED appears to continue to follow this definition. For example, ED appears to use the
national APPE for 1998-1999 for its estimate of full funding for funds distributed for
2000-2001. But estimates of APPE can vary, even for the same or similar time
periods, depending on the source of the estimate. The ED FY2000 full funding
estimate uses an APPE of $6,457. The National Center for Education Statistics
reported a preliminary national APPE for 1998-1999 as $6,408. Even this small
difference results in determinations of total full-funding amounts that differ by more
than $120 million.
Once the full-funding amount for grants to states is determined it must be
adjusted upward slightly to take into account various set asides (if funds are to be
appropriated and allocated under the authority provided in Section 611 of IDEA).
Section 611 provides that certain amounts be set aside for the Outlying Areas and
Freely Associated States (Section 611(b)), for the Secretary of the Interior (Section
611(c) — for Bureau of Indian Affairs (BIA) schools), and for studies and evaluations
(Section 674(e)). The first and third of these set asides provide some flexibility for
the Secretary of Education to determine the percentage allotted, and the Secretary has
tended to allocate less than the maximum allowable percentages for these activities.
However, IDEA specifies an exact percentage of 1.226% of the total appropriation
for the grants to states programs for the Secretary of the Interior. In FY2000 this
amount was about $61.2 million. If the Congress were to decide to continue total set
asides at the current overall percentage, then the full-funding amount for the states
would have to be increased by about 2% to determine the overall full-funding
appropriation.13
Distributional Issues. Once a full funding amount is determined, other issues
could arise, in part, because the method of distributing IDEA funds to states would
change abruptly. As noted above, as appropriations increase above the trigger
amount of approximately $4.9 billion, increasing shares of the total appropriations are
distributed based on population shares and poverty shares. However, when full
funding is reached, the distribution mechanism for most states14 shifts back to one
solely based on states’ shares of children with disabilities, because a state’s full-
funding amount is based on the national APPE times numbers of children with
disabilities served in the state. For example, assume that full funding for FY1998 was
13In the FY2001 request for IDEA funding, ED recommended that the BIA amount be
increased by the rate of inflation over the FY2000 amount — thus overriding and reducing
the statutory requirement of 1.226%. Thus ED recommended that the BIA set aside for
FY2001 be about 1.19%. If this approach were adopted by Congress and followed from year
to year, IDEA funding for BIA schools would grow by the rate of inflation each year but
would not increase in proportion to the increase in overall IDEA Part B grants to states
funding. On the other hand, if the statutory percentage continues to be followed and a full
funding amount is reached, IDEA funding for BIA schools would exceed $200 million dollars.
14See the discussion below for possible exceptions.

CRS-14
about $14.4 billion.15 If $14 billion had been appropriated for FY1998, approximately
three-quarters of those funds would have been distributed under the new formula (i.e.,
based on states’ shares of population and poverty). On the other hand, if the full
funding amount had been provided, all of the funds would have been distributed
according to the proportional share of children with disabilities in each state. Some
states do better under the population-poverty distribution; others do better under
shares of children with disabilities. For example, Alabama’s share of weighted
population-poverty is about 1.5% of the national total, and its share of children with
disabilities is in about 1.7%. On the other hand, Arizona has a larger share of
population-poverty (1.9%) than children with disabilities (1.4%).
Because some states do better than others under the population-poverty formula,
issues could arise if funding approached the full-funding amount or reached full
funding one year but fell below full funding in subsequent years because of increases
in either the national APPE or child counts. Again using our hypothetical FY1998
example in which full funding is approximately $14.4 billion, if $14.0 billion were
appropriated (that is, a total appropriation slightly less than the amount to fully fund
all states) some states could receive full funding while others do not. Those receiving
full funding are those that benefit most under the population-poverty formula, which
would be used to distribute most of the $14 billion. Those below full funding would
be those states that benefit more from a formula based on shares of children with
disabilities. (See Table 2.)
15Data for FY1998 are used for illustrative purposes. The appropriate national APPE for that
year is assumed to be $6,046. All examples are hypothetical. Actual full-funding amounts
presumably would be higher than those presented here, in part, because the estimated national
APPE has increased since FY1998.

CRS-15
Table 2. States At and Below Hypothetical “Full Funding”
Based on Allocating $14 Billion Using FY1998 Data
States within
1% of full
States at full funding
funding
States at 85% to 98% of full funding
Arizona
California
Alabama
Maryland
Ohio
District of Columbia
Colorado
Alaska
Massachusetts
Pennsylvania
Georgia
North Carolina
Arkansas
Minnesota
Rhode Island
Hawaii
Oklahoma
Connecticut Mississippi
South Carolina
Idaho
Oregon
Delaware
Missouri
South Dakota
Michigan
Washington
Florida
Montana
Tennessee
Nevada
Illinois
Nebraska
Texas
Puerto Rico
Indiana
New Hampshire Utah
Vermont
Iowa
New Jersey
Virginia
Kansas
New Mexico
West Virginia
Kentucky
New York
Wisconsin
Louisiana
North Dakota
Wyoming
Maine
A technical problem that could result because of differential benefits from the
two formulas is the inability to allocate all funds if full funding were provided. This
would result because of the 1.5% percentage point cap on how much states can gain
from one year to the next. Since some states might have to receive gains of more than
1.5% percentage points above the overall percentage increase in funding in order to
receive their full-funding amount, they would be capped at amounts below full funding
and some money would not be distributed if the current formula were literally applied.
In the example we are considering (using FY1998 data), Maine, Rhode Island, and
West Virginia would not receive full funding under the current formula but would
receive their 1.5% point cap amounts, and about $8 million dollars could not be
allocated. Of course, fixing this problem would not be difficult. To avoid any
confusion, however, legislation that appropriated full funding for Part B grants to
states could override the current formula and instruct ED to distribute funds to states
based on shares of children with disabilities for the most recent year for which data
are available.
Increased Incentive to “Over-Identify” Children With Disabilities.
As noted above, Congress chose to change the IDEA Part B grants to state formula
to reduce financial incentives to “over-identify” children with disabilities. This is
accomplished by distributing money appropriated above the $4.9 billion trigger in
proportion to population and poverty rather than in proportion to numbers of children
with disabilities. However at the full-funding amount each state would receive its
maximum grant, which is based on each state’s share of children with disabilities.
Under prior law (prior to the 1997 IDEA amendments) there was a cap on the
percentage of children with disabilities that could be counted for the purposes of the
funding formula. The Secretary of Education was not required to count children with

CRS-16
disabilities for the purposes of the formula to the extent that the number of these
children exceeded 12% of the total number of children in the appropriate age range.16
Prior to appropriations exceeding the $4.9 billion trigger, the 12% cap was still in
effect because the “interim formula” references the formula “as in effect prior to the
enactment of the Individuals with Disabilities Education Act Amendments of 1997”17
The maximum grant (i.e., “full-funding” provision) is in another subsection of Section
611 and makes no reference directly or by reference to the 12% limit on the child
count. The provision merely states in part: “the number of children with disabilities
in the State who are receiving special education and related services.”
Depending on ED’s interpretation, states might not be limited in the number of
children they report for the purposes of determining “full-funding” amounts, and the
financial incentives to “over-identify,” which had been curbed by the 12% cap and
removed by the new population-poverty based formula, would be greater than ever.
One option mentioned for addressing this problem would be to amend IDEA to
explicitly tie the 12% cap to the reporting of child counts for the purposes of
determining maximum grants. Unless this change is made well in advance of reaching
full funding, states might perceive incentives to maximize child counts as
appropriations grow. Even if Congress eventually limited child counts to the 12%
limit, “over identification” may have been taking place in anticipation of full funding
being reached and funds being determined based on these counts.
Allocations to LEAs and Intermediate Units. It is important to note that
the 40% maximum grant/“full-funding” amount applies only to state grants, not to the
allocation of state grants to the intermediate and local levels.18 Prior to reaching the
“trigger” amount that initiated the new IDEA formula provisions, states allocated
local portions of their grants to substate levels in proportion to numbers of children
with disabilities served. When the state formula changed with the FY2000
16See Section 611(a)(5)(A) as the Act was in effect prior to the enactment of of P.L. 105-17
(the Individuals with Disabilities Education Act Amendments of 1997). The age range was
3 to 17 if the state served all children with disabilities ages 3 to 5. Otherwise the range was
5 to 17. A similar provision has been part of the state-grants formula since the enactment of
P.L. 94-142. According to the House report:
It has been noted previously that the prevalence of children with handicapping
conditions is generally agreed to represent approximately 12 percent of the total
child population in the Nation. H.R. 7217 stipulates that in the reporting of the
number of handicapped children being served for purposes of the formula for
allocation, no State may report more than 12 percent of its total population of
children aged 5 to 17 (H.Rept. 94-332, p. 12).
17Section 611(d)(2).
18In some states, intermediate educational units (IEUs) provide special education services for
groups of (usually smaller) LEAs. IDEA Part B funds might be allocated by the state to these
intermediate units, or funds allocated to the LEAs they serve might flow through to the IEUs.

CRS-17
appropriation, the substate formula also changed. Like the state grants, recipients at
the substate level receive a base grant derived from their grant in the fiscal year prior
to the initiation of the new formula. Like the state grant, 85% of the remaining funds
are distributed based on population, 15% based on children in poverty. There is no
maximum grant provision analogous to the 40% maximum for the state. Thus even
if a state were to receive its maximum grant amount (based on number of children
with disabilities served), distribution at the substate level would continue to follow the
new substate formula: base grant + (85% of remainder distributed on population and
15% of the remainder distributed based on poverty.) This has the advantage of
continuing to dampen any financial incentive at the substate level to “over-identify”
children with disabilities. At the same time, it is important to remember that “fully
funding” IDEA will not necessarily mean that LEAs and intermediate units will
receive comparable “full-funding” amounts under the current substate formula.
The Cost of Special Education. As noted above, the underlying premise
of IDEA full funding is the assumption that educating children with disabilities is, on
average, twice as expensive as educating other children. The estimate of this excess
costs is the national APPE of which the federal government can pay up to 40%. Is
the assumption of twice the cost as valid as it was in 1975 when the current provision
for “full funding” was introduced? The short answer is that available evidence is out
of date. The last national study of special education cost was based on data from the
mid-1980s;19 and, although a new study is underway, final results from that study may
not be available until late in 2001.20 If the “twice-as-expensive” assumption is
inaccurate, we might find that “fully funding” IDEA may not eliminate or even
significantly reduce funding problems for some states and some LEAs. The following
are some considerations regarding the cost of special education which might influence
the impact of achieving “full funding.”
The Cost of Special Education May Have Grown Faster than the
Cost of Elementary and Secondary Education in General. There is some
historical evidence that special education costs have been rising relative to public
education costs overall. House report language for P.L. 94-142 indicates that
Congress was using special education cost data from the early 1970s. By school year
1977-1978, a Rand study was reporting that “the total cost of special education and
related services per handicapped child was an estimated 2.17 times larger than the ...
total cost of regular education per nonhandicapped child.”21 Based on data from
school year 1985-1986, the Decision Resources Corp. (DRC) study reported that the
19Moore, Mary T., E. William Strang, Myron Schwartz, and Mark Braddock. Patterns in
Special Education Service Delivery and Cost. Decision Resources Corp. Washington, D.C.,
1988. (Hereafter cited as Moore, Patterns in Cost.)
20The study is being conducted for ED by the Center for Special Education Finance (CSEF)
at the American Institutes for Research (AIR) in Palo Alto, CA.
21 Kakalike, Furry, Thomas, and Carney, Cost of Special Education, p. 32.

CRS-18
national average cost for educating a child with a disability was 2.3 time the average
cost for other children.22 The DRC report noted that, while the cost of “regular”
education had increased 4% in constant dollars (i.e., costs adjusted for inflation) since
the time of the Rand study, the average cost of special education and related services
had increased 10% in constant dollars.23 Should the national “full funding” calculation
take into account the possibility that children with disabilities may be more than twice
as expensive? One possible consequence of not examining the original premise of the
1975 Act, is that “full funding,” if achieved might actually fund significantly less than
40% of the excess cost.
The APPE Is a National Average. As previously discussed, IDEA “full
funding” is based on a national APPE. However, average costs (as Table 3 shows)
vary substantially from state to state. For example, the New Jersey APPE is almost
2.5 times the Utah APPE. Thus if it is assumed that special education is about twice
as expensive as “regular” education and that the federal share should be 40% of a
national average cost, some states might receive much less than 40% of their average
cost, and other states might receive substantially more than 40% if the 40% level were
reached nationally. Table 3 shows that, if state APPEs (instead of the national
average APPE) were used to determine the “full funding” for each state, the total
allocated would be similar ($15.6 billion vs. $15.4 billion) but the distribution among
states would be quite different. Some states, such as Ohio and Wyoming (with
APPEs near the national average) would receive approximately 40% of their
estimated costs. However, other states, such as New Jersey and Connecticut, would
receive amounts significantly short of 40% of “full funding.” A third set of states,
such as Utah and Mississippi, would receive amounts much greater than 40% of their
estimated total excess costs.24
Children with Severe Disabilities Often Are Expensive to Serve.
Congress acknowledged in 1975 that even though the average cost for a child with
a disability was about twice that of the average cost of educating other children, costs
were seen as ranging from “1.18 for a child with a speech handicap to 3.69 for a child
with a physical handicap.”25 That is, a child with a speech impairment was estimated
to be 18% more expensive to educate than a nondisabled child while a child with a
physical disability was estimated to be 269% more expensive. A wide range in costs
22Moore, Patterns of Cost, p. iv.
23Ibid., p. 67.
24For example, New Jersey would receive about 25% of its estimated excess cost based on
State APPE calculations while Utah would receive more than 60%.
25H.Rept. No. 94-332, p. 12. The Rand study based on 1977-1978 data found a range in cost
of 1.36 times the average cost per child for children with speech impairments to costs nearly
six times the cost for functionally blind children (Kalkalike, Furry, Thomas, and Carney, Cost
of Special Education, p. vii). The DRC study also found substantial cost differences across
disability categories. (See Moore, Patterns of Cost, p. 85-91.)

CRS-19
certainly is still true today. Moreover these higher cost students may not be randomly
distributed among school districts. For example, parents of severely disabled children
may relocate to be near state-of-the-art medical facilities or to enroll their children in
school districts with good reputations for serving particular disabilities. This means,
again, that an average cost factor (even within a state) may not represent a good
estimate of the real excess costs that some school districts face. Thus a funding level
of 40% of a national or state average excess cost may still leave some school districts
strapped for funds. On the other hand, school districts serving lower cost children
might find that the IDEA grant pays substantially more than 40% of the excess cost
for educating their children.
Table 3. Estimated Idea “Full Funding” Amounts Based on
State and National Average per Pupil Expenditures (APPE)
Estimated
Estimated
Special ed.
funding at 40% funding at 40%
Difference between
students
State
of state APPE
of national
state and national
State
1998-1999 APPE
(in $000)
APPE (in $000)
APPE
New Jersey
210,114 $9,838
$826,841,000
$529,151,000
-36%
New York
432,119 9,598
1,658,991,000
1,088,248,000
-34%
Connecticut
76,740 8,827
270,954,000
193,262,000
-29%
District of
Columbia
8,162 8,685
28,355,000
20,555,000
-28%
Alaska
17,712 8,601
60,936,000
44,606,000
-27%
Rhode Island
27,911 8,325
92,944,000
70,291,000
-24%
Massachusetts
168,964 8,064
545,010,000
425,519,000
-22%
Delaware
16,233 7,656
49,712,000
40,881,000
-18%
Maryland
111,688 7,412
331,133,000
281,275,000
-15%
Pennsylvania
226,378 7,409
670,894,000
570,110,000
-15%
Michigan
208,403 7,330
611,038,000
524,842,000
-14%
Wisconsin
116,328 7,318
340,515,000
292,960,000
-14%
Vermont
12,709 7,166
36,429,000
32,006,000
-12%
Maine
34,294 6,975
95,680,000
86,366,000
-10%
Oregon
69,919 6,920
193,536,000
176,084,000
-9%
Illinois
283,698 6,481
735,459,000
714,465,000
-3%
Indiana
146,559 6,420
376,364,000
369,094,000
-2%
West Virginia
49,934 6,412
128,071,000
125,754,000
-2%
Wyoming
13,333 6,386
34,058,000
33,578,000
-1%
Minnesota
106,194 6,365
270,370,000
267,439,000
-1%
Ohio
230,155 6,275
577,689,000
579,622,000
0%
New
Hampshire
27,502 6,240
68,645,000
69,261,000
1%
Washington
114,144 6,155
281,023,000
287,460,000
2%
Hawaii
20,551 6,146
50,523,000
51,756,000
2%
Kansas
58,425 6,069
141,833,000
147,138,000
4%
Nebraska
43,400 6,043
104,906,000
109,299,000
4%
Montana
18,797 5,847
43,962,000
47,338,000
8%
Iowa
70,958 5,806
164,793,000
178,701,000
8%
Kentucky
87,973 5,746
202,197,000
221,551,000
10%
Florida
345,171 5,731
791,270,000
869,279,000
10%

CRS-20
Estimated
Estimated
Special ed.
funding at 40% funding at 40%
Difference between
students
State
of state APPE
of national
state and national
State
1998-1999 APPE
(in $000)
APPE (in $000)
APPE
Colorado
75,134 5,713
171,696,000
189,217,000
10%
Georgia
155,754 5,665
352,939,000
392,251,000
11%
Missouri
131,565 5,663
298,021,000
331,333,000
11%
Virginia
153,716 5,623
345,738,000
387,118,000
12%
Texas
486,749 5,567
1,083,893,000
1,225,829,000
13%
California
623,651 5,565
1,388,247,000
1,570,603,000
13%
Nevada
33,319 5,429
72,356,000
83,911,000
16%
North Carolina
165,333 5,367
354,937,000
416,375,000
17%
Louisiana
95,245 5,209
198,452,000
239,865,000
21%
South Carolina
99,033 5,204
206,147,000
249,405,000
21%
South Dakota
15,702 4,929
30,958,000
39,544,000
28%
Oklahoma
80,289 4,928
158,266,000
202,200,000
28%
North Dakota
13,181 4,841
25,524,000
33,195,000
30%
Arizona
88,598 4,819
170,782,000
223,125,000
31%
Idaho
27,553 4,808
52,990,000
69,389,000
31%
Alabama
99,813 4,681
186,890,000
251,369,000
35%
Tennessee
128,273 4,672
239,717,000
323,043,000
35%
New Mexico
52,113 4,662
97,180,000
131,241,000
35%
Arkansas
59,110 4,497
106,327,000
148,863,000
40%
Mississippi
61,778 4,129
102,033,000
155,582,000
52%
Utah
55,252 4,049
89,486,000
139,147,000
55%
Puerto Rico
54,158 3,105
67,264,000
136,392,000
103%
U.S. Totals
6,109,787 $6,296 $15,583,969,000 $15,386,888,000
—
Source: CRS calculations based on unpublished data from NCES and Table AA1 from the Twenty-
second Annual Report to Congress on the Implementation of the Individuals with Disabilities
Education Act.
Possible Interim Steps or Alternatives to “Full Funding”
As Congress debates the level of funding for IDEA, there are various policy
options for providing interim steps to full funding or alternatives to full funding.
Although it is beyond the scope of this report to examine all policy alternatives in
depth, the following are brief overviews of possible alternatives.
Increase Funding for Prevention. Virtually all the increase in IDEA
funding over the last few years has gone to Part B grants to states. Funding for
preschool programs for children with disabilities and for infants and toddlers with
disabilities has grown at a much slower pace. Most recently, FY2001 funding for the
Part B grants to states programs rose 27% over the FY2000 funding while funding
for the preschool program remained level (at $390 million) and the infants and
toddlers funding increased by about 2% (to $384 million). Increased funding for the
these programs could arguably decrease incidences of some disabilities. For example,
Lyon and others argue that early intervention, if properly implemented, could

CRS-21
ameliorate, if not prevent, reading learning disabilities.26 Reducing the numbers of
children entering school needing special education could significantly reduce the costs
to states and LEAs.
Of course simply increasing funding for early intervention will not ensure that the
incidence of certain disabilities will decrease. Funding has to support effective
programs for this to happen. In addition, the full impact of early intervention on
reducing the costs of special education (by reducing the numbers of children requiring
special education) will take years to achieve. In the meantime, states and LEAs
would continue to need to fund and provide special education for those older children
who did not benefit from more intense early intervention.
Supplement Funding for Expensive Disabilities. As noted above, the
costs of providing special education and related services vary greatly depending on
the nature of the disability. In some cases the requirements under IDEA to provide
a free appropriate public education (FAPE) can be met at a cost only somewhat above
the cost of educating a nondisabled child. In other cases, providing special education
and related services can be several times the average per pupil expenditure. In small
or medium size school districts, the presence of even one severely disabled child can
strain the district’s budget because the district is legally obligated to provide a free
appropriate public education for that child. Supplementing funding to LEAs with
extremely high special education costs could lessen the burden on these districts.
One difficulty noted in this approach is determining which children’s costs would
be considered and how much payments would be. One approach that Congress has
considered and enacted deals with certain LEAs educating children of parents in the
military. As a supplement to funding under the Impact Aid Program, the Floyd D.
Spence National Defense Authorization Act for Fiscal Year 2001 (P.L. 106-398,
Section 363) authorizes the Secretary of Defense to make payments on behalf of
certain children with severe disabilities. The determination of severity is based on the
cost of a child’s educational and related services. If the LEA is paying for services
by another provider (for example, a private school placement), the cost must be “five
times the national or State average per pupil expenditure (whichever is lower).” If the
LEA serves the child, the cost must be at least “three times the State average per pupil
expenditure.” Payments would be determined after taking into account state, IDEA,
and other funds for the child’s education and related services.27 It is worth noting that
this approach could provide incentives to classify children with disabilities as more
severely disabled.
26See, for example, Fletcher, Jack M., and Reid G. Lyon. Reading: A Research-Based
Approach in What’s Gone Wrong in America‘s Classrooms, edited by Williamson M. Evers.
Hoover Institution Press, 1998, p. 70.
27While authorizing these supplementary payments, the Act does not appear to provide funding
for these payments.

CRS-22
Change the Calculation of “Full Funding”. As discussed above, the
appropriation and distribution of a ‘full-funding’ amount based on the assumption that
special education is, on average, twice as expensive as education for nondisabled
children might not solve the funding problems in all the states and in all the LEAs.
Other discussed policy options include:
! Change the full-funding premise by taking into account possible increases in
the costs of special education since 1975. Such a change would, of course,
make achieving “full funding” even more difficult because it would raise the
necessary amount from nearly $17 billion for FY2001 to $20 billion or more
depending on what assumptions were used to adjust for cost increases.
! Continue calculating the full funding total based on the national APPE but
distribute funds to states based mostly on population and poverty (as the
current formula does) even when the full funding level is reached. This would
avoid any incentive to over-identify children with disabilities and target funds,
to some extent, based on a measure (share of school-age population in
poverty) of need and perhaps incidence of disability.
! Determine and distribute full funding based on state APPEs rather than a
national average. This probably would not significantly change the overall cost
of full funding but would greatly change how funds are distributed among the
states — a potential political concern for Members of Congress.28
28Formulas authorized under Title I, Part A of the Elementary and Secondary Education Act
(ESEA) for grants for disadvantaged children use modified state APPEs. For a discussion of
the Title I formulas, see CRS Report RL30491, Education for the Disadvantaged: ESEA
Title I Allocation Formula Provisions, by Wayne Riddle.